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Uncertainty and Tobin’s Q in a Monopolistic Competition Framework

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  • LICANDRO Omar

    (UNIVERSITE CATHOLIQUE DE LOUVAIN)

Abstract

This 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).

Suggested Citation

  • LICANDRO Omar, 1990. "Uncertainty and Tobin’s Q in a Monopolistic Competition Framework," LIDAM Discussion Papers IRES 1990003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1990003
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    Cited by:

    1. Rama, Martin, 1990. "Empirical investment equations in developing countries," Policy Research Working Paper Series 563, The World Bank.

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