Irreversible investment with regime shifts

• 成果类型: Article
• 署名作者: Guo, X; Miao, HJ; Morellec, E
• 署名单位: University of Rochester; Cornell University; Boston University; University of Lausanne; University of Geneva
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2004.04.005
• 发表日期: 2005
• 页码: 37-59
• 关键词: investment; capacity choice; regime shifts

摘要

Under the real options approach to investment under uncertainty, agents formulate optimal policies under the assumption that firms' growth prospects do not vary over time. This paper proposes and solves a model of investment decisions in which the growth rate and volatility of the decision variable shift between different states at random times. A value-maximizing investment policy is derived such that in each regime the firm's investment policy is optimal and recognizes the possibility of a regime shift. Under this policy, investment is intermittent and increases with marginal q. Moreover, investment typically is very small but, in some states, the capital stock jumps. Implications for marginal q and the user cost of capital are also examined. (c) 2004 Elsevier Inc. All rights reserved.