This paper extends the theory of investment under uncertainty to incorporate fixed costs of
investment, a wedge between the purchase price and sale price of capital, and potential …

Capital investment decisions must recognize the limitations on the firm's ability to later sell
or expand capacity. This paper shows how opportunities for future expansion or contraction …

We document that the rise of factors such as software, intellectual property, brand, and innovative
business processes, collectively known as “intangible capital” can explain much of the …

Investment is characterized by costly reversibility when a firm can purchase capital at a
given price and sell capital at a lower price. We solve for the optimal investment of a firm that …

Intangible assets are a large and growing part of firms’ capital stocks. Intangibles are accumulated
via investment—foregoing consumption today for output in the future—but they lack a …

This paper tests an optimal (S, s) rule in household durable purchases and examines directly
the resulting aggregate expenditure dynamics. The observed decision rule responds to …

Irreversibility and uncertainty increase the user cost of capital which tends to reduce the
capital stock. Working in the opposite direction is a hangover effect, which arises because …

In the Old Economy, the value of a company was mostly in its hard assets-its buildings,
machines, and physical equipment. In the New Economy, the value of a company derives more …

We derive a closed-form solution for Tobin's Q in a stochastic dynamic framework. We show
analytically that investment is positively related to Tobin's Q and cash flow, even in the …

The best predictor of current investment at the firm level is lagged investment. This lagged-investment
effect is empirically more important than the cash-flow and Q effects combined. We …