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Limited Attention, Interaction and the Growth of a Firm

Author

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  • Katsuya Takii

    (Osaka School of International Public Policy, Osaka University)

Abstract

A person cannot make many decisions at a time, but an organization needs millions of interrelated decisions. We incorporate this idea into investment theory and examine its influence on a firm's growth rate. Two assumptions are emphasized: an agent cannot optimize more than one input at a time, and there is interaction among inputs. Each investment is lumpy, but adjustment is gradual. Without an adjustment cost function and exogenous shocks, we derive the growth rate of a firm. The derived growth rate is independent of firm size and imperfectly correlated with Tobin's Q.

Suggested Citation

  • Katsuya Takii, 2005. "Limited Attention, Interaction and the Growth of a Firm," Macroeconomics 0506005, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0506005
    Note: Type of Document - pdf; pages: 47
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    References listed on IDEAS

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    8. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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    12. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
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    Cited by:

    1. Takii, Katsuya, 2009. "Limited attention, interaction and the gradual adjustment of a firm's decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 345-362, February.

    More about this item

    Keywords

    Limited Attention; Complementarity and Substitutability; Investment; Tobin's Q.;

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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