The preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk. Yet it is an important factor in decisions to hold liquid assets or delay irreversible investment. This paper formalizes the notion of flexibility in a sequential decision context, and relates its value to the amount of information an agent expects to receive. A rudimentary money demand model is developed embodying these ideas, and the history of flexibility as an economic concept is traced.

Journal Article A Note on “The Optimal Depletion of Exhaustible Resources” Get access Farhed A. Shah Farhed A. Shah University of Alberta Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 51, Issue 2, April 1984, Page 351, https://doi.org/10.2307/2297698 Published: 01 April 1984 Article history Received: 01 August 1983 Accepted: 01 October 1983 Published: 01 April 1984

This paper presents an experimental study of a computerized “posted-offer” pricing mechanism that captures many of the basic institutional features of retail exchange in the U.S. Posted-offer market performance is evaluated relative to “double-auction” market performance using two supply and demand designs. Subject experience with the trading mechanism is explicitly considered as an experimental treatment variable. The market data suggest that prices tend to be higher and efficiency lower under posted-offer pricing relative to double auction. However, the institutional effect appears to interact with other design conditions. When feasible, the predictive power of competitive, Nash, and limit-price theoretic equilibria are empirically evaluated.