INTEGRATED PRODUCTION AND THE INVESTMENT–UNCERTAINTY RELATIONSHIP |
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| Authors: | yingyi tsai ching-tang wu |
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| Affiliation: | Department of Applied Economics, National University of Kaohsiung, Taiwan;
Department of Applied Mathematics, National Chiao Tung University, ShinChu, Taiwan |
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| Abstract: | This paper studies the role of production mode in determining the effects of an increase in uncertainty on the choice of investment outlay. In a continuous-time model of optimal capital investment with innovative R&D under demand uncertainty, we show that investments in both capital and innovative research decrease with an increase in uncertainty, and that such investments rise with the level of primary demand. Our result sheds light on the mode of production as a source of the negative investment–uncertainty relationship. |
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| Keywords: | D24 D40 D81 D92 E22 L23 |
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