This paper extends the literature on technology adoption by introducing a distinction between technological breakthroughs (‘innovations’) and the engineering re/nements (‘improvements’) that follow such a breakthrough. Firms do not necessarily wait for a future technological breakthrough, but instead have an incentive to delay the adoption of a new technology until it is su2ciently advanced. We...

Ž . Building on evidence that a productivity growth from learning by doing diminŽ . ishes as experience accumulates with a technology and b learning by doing is largely specific to each production technology, this paper models a firm’s decision of when to update its technology. The model implies that technology updates endogenously bring large drops in productivity. The model also implies that ...

This paper endogenizes the cost of external funds and explores the implications on irreversible investments. The investment strategy incorporates equilibrium feedback that result from a bargaining process between the firm and a lender. Contrary to debt issuance, tax benefits and distress costs cannot be internalized by the firm. “Bad news” are less costly for the firm that has incentives to acc...

Due to embodied technological progress new generations of capital goods are more productive. Therefore, in order to study the effects of technological progress, a model must be analyzed in which different generations of capital goods can be distinguished. We determine in what way the firm adjusts current investments to predictions of technological progress. In the presence of market power we sh...

We formulate a dynamic model of voluntary investment in a public project. We distinguish two alternative scenarios. One in which private agents have full knowledge about the accumulated aggregated contributions and one in which each agent only has knowledge about his personal contributions. For both scenarios we investigate whether or not the public project will be efficiently funded by the age...

Research on climate change suggests that small improvements in the “sustainability” of buildings can have large effects on greenhouse gas emissions and on energy efficiency in the economy. This paper analyzes the economics of “green” building. First, we analyze a panel of office buildings certified by independent rating agencies, finding that large recent increases in the supply of green buildi...

This paper extends Merton’s continuous time (instantaneous) mean-variance analysis and the mutual fund separation theory. Given the existence of a Markovian state price density process, the optimal portfolios from concave utility maximization are instantaneously mean-variance efficient independent of the concave utility function’s form. The Capital Asset Pricing Model holds with the market port...