We develop and characterize analytically an investment model in discrete time with a fixed adjustment cost not proportional to existing capital and complete irreversibility that reproduces the lumpiness of investment at the micro-level. In agreement with the empirical evidence, as a firm size increases, investment becomes less lumpy. The optimal policy is of the generalized (S,s) form.
Authors
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
PhD scholar University of Wisconsin
Nicolas is a Phd Student at Paris School of Economics and a Phd Scholar at the Centre for Microdata Methods and Practice. His research interests include structural econometrics, applied macroeconomics and computational economics.
Journal article details
- DOI
- 10.1016/j.econlet.2014.06.026
- Publisher
- Elsevier
- Issue
- Volume 124, Issue 3, September 2014
Suggested citation
Roys, N. (2014). 'Optimal investment policy with fixed adjustment costs and complete irreversibility' 124(3/2014)
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