An irreversible investment model with a stochastic production capacity and fixed plus proportional adjustment costs

This paper studies the problem of a company which expands its stochastic production capacity in irreversible investments by purchasing capital and faces both fixed and proportional costs. The objective of the company is to find optimal production decisions to maximize its expected total net profit in an infinite horizon. We solve this problem explicitly by applying the theory of stochastic impulse controls.

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Year of publication:	2006-10-15
Authors:	Kamarianakis, Yiannis ; Xepapadeas, Anastasios
Institutions:	Department of Economics, University of Crete
Subject:	Irreversible investment \| production \| quasi-variational inequalities \| stochastic impulse control

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 0708 20 pages
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; D92 - Intertemporal Firm Choice and Growth, Investment, or Financing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004994322