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Informational spillovers and the coordination of speculative investments

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  • Francisco González

Abstract

The influence of informational spillovers on the entrepreneur's incentive to undertake reversible investment opportunities is considered. It is shown how investment activity can be driven by the influence that the prospect of social learning has on the option value of investment. In this context, episodes of high investment activity result from a speculative motive, and the expected short-run profitability of new investment opportunities may inadequately reflect the entrepreneurs' incentive to invest.

Suggested Citation

  • Francisco González, 2004. "Informational spillovers and the coordination of speculative investments," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 140-148, February.
    • Handle: RePEc:cje:issued:v:37:y:2004:i:1:p:140-148
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