EconPapers    
Economics at your fingertips  
 

Experimental Evidence on the Cyclicality of Investment

Cortney Rodet () and Andrew Smyth ()
Additional contact information
Cortney Rodet: Department of Economics, Ohio University

Working Papers from Chapman University, Economic Science Institute

Abstract: We report laboratory experiments investigating the cyclicality of investment. In our setting, optimal investment is counter-cyclical because investment costs fall following market downturns. However, we do not observe counter-cyclical investment. Instead, heuristic investment models where firms invest a fixed percentage of their liquidity, or a fixed percentage of anticipated market demand, better fit our data on average than does optimal investment. We also report a control treatment without cost changes and a treatment with asymmetric investment liquidity. Both of these extensions support our main result.

Keywords: investment; business cycles; heuristics; experimental economics (search for similar items in EconPapers)
JEL-codes: C90 D22 D25 E22 E32 L16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-mac
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://digitalcommons.chapman.edu/esi_working_papers/237/

Related works:
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:chu:wpaper:18-02

Access Statistics for this paper

More papers in Working Papers from Chapman University, Economic Science Institute Contact information at EDIRC.
Bibliographic data for series maintained by Megan Luetje ().

 
Page updated 2019-10-14
Handle: RePEc:chu:wpaper:18-02