The Dynamics of a Simple Relative Adjustment Cost Framework
This paper considers a capital accumulation model with the specific feature that adjustment costs depend on investment relative to the size of the capital stock. This framework has, beyond its plausible yet neglected setting, a number of interesting consequences. In particular, the possibility of multiple equilibria, of an unstable steady state and thus of a (`history dependent') threshold associated with concavity is surprising given a voluminous literature on multiple, history-dependent equilibria emphasizing non-concavities (or convexities). Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2001.
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Volume (Year): 2 (2001)
Issue (Month): 3 (08)
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References listed on IDEAS
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457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321-321.
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