'Reverse Hysteresis': R&D Investment with Stochastic Innovation

Helen Weeds

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We consider optimal investment behavior for a firm facing both technological and economic uncertainty, in the context of a research project with unpredictable outcomes. The optimal investment strategy, in the form of a pair of trigger points for investment and abandonment, is derived. As in Dixit (1989), the investment trigger exceeds the Marshallian investment point.

Keywords: RESEARCH AND DEVELOPMENT; INVESTMENTS; BEHAVIOUR (search for similar items in EconPapers)
JEL-codes: C61 D81 E22 O31 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:578

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