Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103340
Authors: 
Borrmann, Jörg
Brunekreeft, Gert
Year of Publication: 
2011
Series/Report no.: 
Bremen Energy Working Papers 08
Abstract: 
In an intertemporal model, we analyze the timing of irreversible and lumpy monopoly investment under certainty. There are two reasons for investing, i.e. wear and tear leading to replacement investment and demand growth leading to expansion investment. Both in a single investment setting and in a repeated investment setting, we find that a firm maximizing discounted social welfare invests earlier than an identical firm maximizing discounted profits. The investment date of an identical firm maximizing a discounted convex combination of social welfare and profits lies between these polar cases. All results apply both to replacement investment and to expansion investment.
Subjects: 
Expansion investment
Investment timing
Monopoly
Repeated investment
Replacement investment
JEL: 
D42
G00
L20
Document Type: 
Working Paper

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