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A real options approach to investment in factor demand models

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  • Stein Ostbye

Abstract

A real options approach to investment is used to derive a new full static equilibrium condition for capital within the framework of a restricted variable cost function. Empirical evidence suggests that the use of the traditional equilibrium condition may be grossly misleading.

Suggested Citation

  • Stein Ostbye, 1997. "A real options approach to investment in factor demand models," Applied Economics Letters, Taylor & Francis Journals, vol. 4(3), pages 153-157.
    • Handle: RePEc:taf:apeclt:v:4:y:1997:i:3:p:153-157
    DOI: 10.1080/135048597355410
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    References listed on IDEAS

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    1. Norsworthy, J R & Zabala, Craig A, 1985. "Effects of Worker Attitudes on Production Costs and the Value of Capital Input," Economic Journal, Royal Economic Society, vol. 95(380), pages 992-1002, December.
    2. Conrad, Klaus & Unger, Ralph, 1987. "Ex post tests for short-and long-run optimization," Journal of Econometrics, Elsevier, vol. 36(3), pages 339-358, November.
    3. Stein Ostbye, 1998. "Real options, wage bargaining, factor subsidies and employment," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 335-344.
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    Cited by:

    1. Murat Isik, 2005. "Incorporating decision makers' risk preferences into real options models," Applied Economics Letters, Taylor & Francis Journals, vol. 12(12), pages 729-734.

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