Fixed Costs: The Demise of Marginal q /
Caballero, Ricardo J.
Fixed Costs: The Demise of Marginal q / Ricardo J. Caballero, John V. Leahy. - Cambridge, Mass. National Bureau of Economic Research 1996. - 1 online resource: illustrations (black and white); - NBER working paper series no. w5508 . - Working Paper Series (National Bureau of Economic Research) no. w5508. .
March 1996.
The standard version of q theory, in which investment is positively related to marginal q, breaks down in the presence of fixed costs of adjustment. With fixed costs, investment is a non-monotonic function of q. Therefore its inverse, which is the traditional investment function, does not exist. Depending upon auxiliary assumptions, the correlation between investment and marginal q can be either positive or negative. Given certain homogeneity assumptions, a version of the theory based on average q still holds, although under the same assumptions profits and sales perform as well as average q. More generally, q is no longer a sufficient statistic.
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Mode of access: World Wide Web.
Fixed Costs: The Demise of Marginal q / Ricardo J. Caballero, John V. Leahy. - Cambridge, Mass. National Bureau of Economic Research 1996. - 1 online resource: illustrations (black and white); - NBER working paper series no. w5508 . - Working Paper Series (National Bureau of Economic Research) no. w5508. .
March 1996.
The standard version of q theory, in which investment is positively related to marginal q, breaks down in the presence of fixed costs of adjustment. With fixed costs, investment is a non-monotonic function of q. Therefore its inverse, which is the traditional investment function, does not exist. Depending upon auxiliary assumptions, the correlation between investment and marginal q can be either positive or negative. Given certain homogeneity assumptions, a version of the theory based on average q still holds, although under the same assumptions profits and sales perform as well as average q. More generally, q is no longer a sufficient statistic.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.