Licentiate Seminar: Investment decisions with incomplete information

Supervisor is Professor Erik Ekström and the external reviewer is Professor Stephane Villeneuve from Toulouse School of Economics.

Abstract: In this licentiate thesis we consider three different stochastic control problems with incomplete information, where some agent gradually learns by observing a noisy observation process. In [1] we discuss a signaling game between an employer and an employee with an unknown capacity. We characterize an equilibrium in the form of a strategy for the salary claim and the possible firing time. Both [2] and [3] consider an irreversible investment into a project with an unknown project value. In [2], an increased investment level speeds up future learning, whereas in [3] an increased investment level gives an immediate push in the learning process.

[1] Erik Ekström and Topias Tolonen-Weckström. Hiring and firing – a signaling game. To appear in: Journal of Applied Probability, 62(2), 2025.
[2] E. Ekström, A. Milazzo, Y. Kitapbayev, T. Tolonen-Weckström. An irreversible investment problem with a learning-by-doing feature. Pre-print, submitted, 2024.
[3] Topias Tolonen-Weckström. Learning from the past in an irreversible investment problem. Draft, 2025

A link to the thesis in DiVA will appear in this list as soon as it is published there.