EconPapers    
Economics at your fingertips  
 

Investment, Private Information, and Social Learning: A Case Study of the Semiconductor Industry

Rose Cunningham ()

Staff Working Papers from Bank of Canada

Abstract: Social learning models of investment provide an interesting explanation for sudden changes in investment behaviour. Caplin and Leahy (1994) develop a model of social learning in which agents learn about the true state of demand from the investment suspension decisions of other agents. The author tests the main predictions of Caplin and Leahy’s model using a unique database of investment projects undertaken by semiconductor plants. She finds that firms that are installing a significant new technology appear to be influenced by social learning, because they are more likely to suspend their investment project when other suspensions occur. A 1 per cent increase in the number of other suspensions increases by 3.6 per cent the probability that an average new technology plant will suspend their investment project. Suspensions by other agents also significantly affect plants that use conventional technology, but that effect is negative. The conventional technology plants are less likely to suspend their investment project when other firms suspend, which suggests that their payoffs are strategic substitutes, as in a "war-of-attrition" game.

Keywords: Business; fluctuations; and; cycles (search for similar items in EconPapers)
JEL-codes: C35 E32 L63 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2004
New Economics Papers: this item is included in nep-bec and nep-evo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp04-32.pdf

Related works:
Working Paper: Investment, Private Information and Social Learning: A Case Study of the Semiconductor Industry (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:04-32

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2022-01-09
Handle: RePEc:bca:bocawp:04-32