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Optimal capital investment under uncertainty: An extension

Author

Listed:
  • Inwon Jang

    (Merrimack College)

  • Hyeon-seung Huh

    (Yonsei University)

  • Richard Wong

    (Hartford Investment Management Company)

Abstract

This paper develops a model for optimal capital investment in continuous time when both existing and new capital stocks are subject to uncertainty. The model is generalized to allow for large and infrequent changes in the dynamics of the capital stock, which may arise as a result of natural and man-made disasters.

Suggested Citation

  • Inwon Jang & Hyeon-seung Huh & Richard Wong, 2008. "Optimal capital investment under uncertainty: An extension," Economics Bulletin, AccessEcon, vol. 5(4), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-08e20002
    as

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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume5/EB-08E20002A.pdf
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    References listed on IDEAS

    as
    1. Dueker Michael & Fischer Andreas & Dittmar Robert, 2007. "Stochastic Capital Depreciation and the Co-movement of Hours and Productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-24, January.
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    6. Devarajan, Shantayanan & Easterly, William R & Pack, Howard, 2003. "Low Investment Is Not the Constraint on African Development," Economic Development and Cultural Change, University of Chicago Press, vol. 51(3), pages 547-571, April.
    7. Cooley, Thomas F. & Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "The replacement problem," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 457-499, December.
    8. Steve Ambler & Alain Paquet, 1992. "Stochastic Depreciation and the Business Cycle Puzzle," Cahiers de recherche CREFE / CREFE Working Papers 8, CREFE, Université du Québec à Montréal.
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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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