Optimal Investment with Costly Reversibility

摘要: Investment is characterized by costly reversibility when a firm can purchase capital at given price and sell lower price. We derive an explicit analytic solution for optimal investment facing reversibility. In addition, we local approximation to the which highlights effects of parameters problem on triggers investment. More generally, extend Jorgensonian concept user cost case uncertainty define cU cL as costs associated with sale capital, respectively. Optimality requires the" needed keep marginal revenue product in" closed interval [cU,cL]. This prescription encompasses irreversible well standard" neoclassical costlessly reversible Finally, quantitative analysis suggests" that even difference between prices small purchasing selling are closer those applicable under" complete irreversibility than under costless reversibility."