Investment, Capacity Constraints and Uncertainty on the Input Price

Corinne Chaton

Working Papers from Toulouse - GREMAQ

Abstract: This paper extends the theory of irreversible investment under uncertainty to incorporate capacity constraints and uncertainty on the input price. In addition, no restriction on the demand elasticity value is imposed. Assuming input price follows a geometric Brownian motion, the optimal irreversible investment policy of a risk neutral regulated firm is analyzes. A simple rule that maximizes social welfare is derived and used to compute the optimal exercise rule, in several numerical simulations.

Keywords: INVESTMENTS; UNCERTAINTY; PRICES; ELASTICITY (search for similar items in EconPapers)
JEL-codes: D8 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Investment, Capacity Constraints and Uncertainty on the Input Price (1998)
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:fth:gremaq:97.484

Access Statistics for this paper

More papers in Working Papers from Toulouse - GREMAQ GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().