An Exact solution for the investment and value of a firm facing uncertainty, adjustment costs, information costs and irreversibility
نویسنده
چکیده
Following the analysis in Abel and Eberly (1997), I derive closed-form solutions for the investment and value of a competitive firm with a constantreturns-to-scale production function and convex costs of adjustment. The analysis concerns reversible and irreversible investments under incomplete information. Optimal investment seems to be a non-decreasing function of q, the shadow value of capital. This depends also on the magnitude of shadow costs of incomplete information.
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