HYSTERESIS AND ASSET FIXITY UNDER UNCERTAINTY

The fixed asset theory, when viewed as an investment/disinvestment theory, implies a simple two-parameter control-limit decision rule. The theory is extended to incorporate the stochastic nature of farm revenue. The results show that ongoing uncertainty leads to a widening of the range of inaction because there is a positive value of waiting. The effects of sunk costs, or the divergence of acquisition costs from salvage values, on the degree of investment/ disinvestment irreversibility become more pronounced when uncertainty is present.


Issue Date:
Aug 04 1991
Publication Type:
Conference Paper/ Presentation
Record Identifier:
http://ageconsearch.umn.edu/record/271275
Language:
English
Total Pages:
16




 Record created 2018-04-12, last modified 2018-04-12

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