Optimal regime switching under risk aversion and uncertainty
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文摘

We develop a regime-switching, utility-based framework for sequential investment.

Greater price uncertainty and risk aversion may accelerate regime switching.

Greater risk aversion promotes a compulsive and a laggard regime-switching strategy.

Higher output price or innovation rate mitigates the impact of risk aversion.

A leapfrog/laggard strategy may dominate even when a decisionmaker is risk averse.

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