A Putty-Clay Model of Demand Uncertainty and Investment

This paper uses a simple model to explore the effects of 'increasing demand risk' on business fixed investment. We show that within a putty-clay framework an increase in demand uncertainty can be expected to have two countervailing effects. On the one hand increasing risk tends to induce a firm to increase its capacity, but on the other hand the optimal capital intensity of that capacity decreases.

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Year of publication:	1979
Authors:	Albrecht, James W. ; Hart, Albert G.
Publisher:	Stockholm : The Research Institute of Industrial Economics (IUI)
Subject:	Firm investment \| Firm strategy \| Production

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Series:	IUI Working Paper ; 20
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	hdl:10419/94711 [Handle] RePEc:hhs:iuiwop:0020 [RePEc]
Classification:	D92 - Intertemporal Firm Choice and Growth, Investment, or Financing ; L11 - Production, Pricing, and Market Structure Size; Size Distribution of Firms
Source:	EconStor

Persistent link: https://www.econbiz.de/10010334681