| Abstract: | In this dissertation investment theory is considered for the hypothesis of both deterministic and stochastic future prices. Two types of models are considered for each case. The first model does not restrict investment to be nonnegative-reversible investment problem. The second model does not allow for sales of capital- irreversible investment problem. All models are formulated in discrete time. In Chapter I the literature on investment theory is reviewed. The basic investment model to be used in the remaining chapters evolves from consideration of the strengths and weaknesses of the specific models presented in the literature. In Chapter II the deterministic, reversible investment problem is solved. Emphasis is placed on the traditional long-run equilibrium condition, since this condition was not previously considered. In Chapter III the deterministic irreversible investment problem is solved. In both Chapters II and III, the optimal investment policies and hence, optimal capital policies are derived. A comparative dynamic analysis is presented in which the variation in the time path of capital is derived for variations in the time path of prices. Although it was previously claimed that the reversible model directly linked the traditional theory of production to investment theory, the main conclusion of the section on deterministic investment theory is that the irreversible investment problem is more closely related to the total traditional theory of production.. |
|---|