Investment in salvage equipment

Article Abstract:

A model describing salvage capacity as part of traditional capital budgeting is developed. The model assumes that manufacturers with excess products can mark them down up to selling point, dispose them or salvage to recover raw materials and components. Findings indicate that managers often make poor decisions concerning investment in such equipment because they fail to consider the effects of its production run size and selling price.

Management, Industrial equipment

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Do some firms rely on the owners' preferences instead of sunk investments to guarantee performance?

Article Abstract:

The Klein and Lefler approach to owner preference and sunk investmentss to predict business performance is discussed. The argument that customers' preference based on the previous functional utility of a business entity and not the amount of sunk investments can guarantee future profitability of the firm, proved to be a reliable premise. Sunk investments are found to provide limited guarantees of performance.

Research, Property, Business economics, Managerial economics

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Behavioral uncertainty and investments in cooperative relationships

Article Abstract:

A cooperative relationship is examined between two economic agents, in which one agent can make investments in the relationship to reduce the probability that the other agent defects. It is shown that the relationship between investment and probability of defection depends on the type of uncertainty considered and the effects of parameter changes are analyzed on the optimal level of investment.

Rational expectations (Economics), Investment management, Cooperative research

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