Uncertainty and Tobin’s Q in a Monopolistic Competition Framework
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).
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|Date of creation:||01 Jan 1990|
|Date of revision:|
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- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Fumio Hayashi, 1981.
"Tobin's Marginal q and Average a : A Neoclassical Interpretation,"
457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
- N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 529-538.
- repec:adr:anecst:y:1986:i:2:p:05 is not listed on IDEAS
- repec:adr:anecst:y:1986:i:2 is not listed on IDEAS
- Philippe Michel, 1986. "Dynamique de l'accumulation de capital en présence de contraintes de débouchés," Annals of Economics and Statistics, GENES, issue 2, pages 117-145.
- Dreze, Jacques & Bean, Charles R, 1990. " European Unemployment: Lessons from a Multicountry Econometric Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 135-65.
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