⁹The model could even be interpreted as applying to the behavior of a firm controlled by a risk-neutral manager, so long as the collapse of a line of business could have the effect of reducing the firm’s collateral value and therefore increasing its cost of external finance à la Bernanke, Gertler, and Gilchrist (1996). In this case, the convex increase in borrowing rates when cash drops plays the same role as the convexity of the marginal utility function for a consumer; see also Berk, Stanton, and Zechner (2009) for an argument that senior firm managers are not risk neutral even if shareholders are, because poor performance under their tenure will reduce their own future employment opportunities. A firm controlled by such managers may behave very much like a risk-averse household.