Uncertainty and Tobin´s q in a monopolistic competition framework

Omar Licandro ()

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper combines the adjustment cost hypothesis of Tobin's q models with Malinvaud's proposition that demand uncertainty matters in explaining investment. Demand uncertainty allows for ex-post excess capacity and leads firms to look at the expeeted excess capacity in deciding about investment. Marginal q is shown to be smaller than average q, the difference being explained by the degree of capacity utilization (DUC).

Keywords: Tobin's; q; Investment; Monopolistic; Competition; Quantity; Rationing; Model (search for similar items in EconPapers)
Date: 1991-02
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Related works:
Working Paper: Uncertainty and Tobin’s Q in a Monopolistic Competition Framework (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:2769

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