Journal of Economic Literature
Book Reviews
2026-09-01
Giuseppe Bertola of Universita di Torino reviews “The Economics of Inaction: Stochastic Control Models with Fixed Costs” by Nancy L. Stokey,. The EconLit Abstract of the reviewed work begins “Provides an introduction to stochastic control models in economics that feature fixed adjustment costs or other elements that lead to inaction regions. Discusses stochastic processes, Brownian motions, and diffusions; stochastic integrals and Ito’s lemma; martingales; useful formulas for Brownian motions; exercising an option; models with fixed costs; models with fixed and variable costs; models with continuous control variables; regulated Brownian motion; investment--linear and convex adjustment costs; and an aggregate model with fixed costs. Stokey is Frederick Henry Prince Professor of Economics at the University of Chicago. Index.”