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Investment in Competitive Equilibrium: The Optimality of Myopic Behavior

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  • John V. Leahy

Abstract

There is an extensive literature on the optimal irreversible investment strategy of a solitary firm facing an exogenous price process. This paper shows that the investment strategies that this literature derives may be optimal in competitive equilibrium even though the price process is now endogenous. This provides a simple means for computing equilibrium investment strategies.

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  • John V. Leahy, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 1105-1133.
    • Handle: RePEc:oup:qjecon:v:108:y:1993:i:4:p:1105-1133.
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    File URL: http://hdl.handle.net/10.2307/2118461
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