Uncertainty and Tobin’s Q in a Monopolistic Competition Framework
AbstractThis paper combines the adjustment costs hypothesis of Tobin’s q models with Malinvaud’s proposition that, irreversibility and uncertainty matter in explaining investment. Demand uncertainty and irreversibility allow for excess capacity and lead firms to look at the expected excess capacity in deciding about investment. Marginal q is shown to be smaller than average q, the difference being explained by the degree of capacity utilization (DUC).
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1990003.
Date of creation: 01 Jan 1990
Date of revision:
uncertainty; competition; demand; investment policy;
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- Rama, Martin, 1990. "Empirical investment equations in developing countries," Policy Research Working Paper Series 563, The World Bank.
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