The “new” view of investment decisions and public policy analysis: An application to green lights and cold refrigerators
Recent research in investment theory emphasizes the importance of sunk investment costs, uncertainty in returns, and flexibility in investment timing. Allowing for the presence of these characteristics alters traditional discounted cash flow rules for when to invest. Those rules will recommend investing at lower rate-of-retum thresholds than is optimal. This article describes this research and suggests the range of potential situations to which the theory applies. It also discusses the implications for policy analysis and suggests that government programs to encourage investment may, in some cases, be inappropriate. After discussing a wide array of possible applications, we focus on one in particular: programs to encourage energy-efficient investment. The examples suggest the importance of applying the new investment theory for economic analysis of investment in energy-efficient technologies.
Volume (Year): 14 (1995)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/journal/34787/home|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lawrence H. Summers, 1987.
"Investment Incentives and the Discounting of Depreciation Allowances,"
in: The Effects of Taxation on Capital Accumulation, pages 295-304
National Bureau of Economic Research, Inc.
- Lawrence H. Summers, 1986. "Investment Incentives and the Discounting of Depreciation Allowances," NBER Working Papers 1941, National Bureau of Economic Research, Inc.
- Kevin A. Hassett & Gilbert E. Metcalf, 1998.
"Investment With Uncertain Tax Policy: Does Random Tax Policy Discourage Investment?,"
Discussion Papers Series, Department of Economics, Tufts University
9823, Department of Economics, Tufts University.
- Hassett, Kevin A & Metcalf, Gilbert E, 1999. "Investment with Uncertain Tax Policy: Does Random Tax Policy Discourage Investment?," Economic Journal, Royal Economic Society, vol. 109(457), pages 372-93, July.
- Kevin Hassett & Gilbert E. Metcalf, 1994. "Investment with Uncertain Tax Policy: Does Random Tax Policy Discourage Investment?," NBER Working Papers 4780, National Bureau of Economic Research, Inc.
- James L. Paddock & Daniel R. Siegel & James L. Smith, 1988. "Option Valuation of Claims on Real Assets: The Case of Offshore Petroleum Leases," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 479-508.
When requesting a correction, please mention this item's handle: RePEc:wly:jpamgt:v:14:y:1995:i:4:p:517-531. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.