Optimal Dynamic Investment Policies under Concave-Convex Adjustment Costs

摘要

The paper considers a dynamic investment model of a monopolistic firm, facing adjustment costs that are concave-convex in the rate of investment. Assuming that the firm is managed by the shareholders, the objective is to maximize the discounted stream of dividends over a finite planning horizon, plus the terminal value of the capital stock. The problem of finding an optimal investment path is solved by combining results from a model with concave adjustments costs with results from a model with convex adjustment costs. The results are presented in phase diagrams and are economically interpreted.