Uncertainty and Tobin’s Q in a Monopolistic Competition Framework

Omar Licandro (licandro.omar@gmail.com)

No 1990003, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper combines the adjustment costs hypothesis of Tobin’s q models with Malinvaud’s proposition that, irreversibility and uncertainty matter in explaining investment. Demand uncertainty and irreversibility allow for excess capacity and lead firms to look at the expected 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: uncertainty; competition; demand; investment policy (search for similar items in EconPapers)
Pages: 29
Date: 1990-01-01
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Uncertainty and Tobin´s q in a monopolistic competition framework (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1990003

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