Integrated Production And The Investment-Uncertainty Relationship
This paper studies the role of production mode in determining the effects of an increase in uncertainty on the choice of investment outlay. In a continuous-time model of optimal capital investment with innovative "R&D" under demand uncertainty, we show that investments in both capital and innovative research decrease with an increase in uncertainty, and that such investments rise with the level of primary demand. Our result sheds light on the mode of production as a source of the negative investment-uncertainty relationship. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 Economic Society of South Africa.
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Volume (Year): 77 (2009)
Issue (Month): 1 (03)
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