Overview

This is a contribution to the dynamic theory of the firm. It discusses optimal investment, financing and production policies of the firm that have to deal with a diversity of aspects, such as alternative production techniques, financial constraints, technological progress, business cycles, uncertainty and environmental constraints. The book studies how debt financing may facilitate expansion and how cost prices, prices of capital goods and investment grants influence depth investment decisions. Optimal investment decisions are analyzed, taking into account taxation on environmental pollution, business cycles, adjustment costs and technological progress. Results are obtained by using optimal control theory. The models lead to descriptions of growth and decline patterns of firms as in practice, with distinctive stages succeeding each other, each with its own emphasis on specific management policies (growth consolidation, depth investments, abatement efforts, etc).

Full Product Details

Author:   Onno Van Hilten ,  Peter M. Kort ,  Paul J. J. M. Van Loon
Publisher:   Springer-Verlag Berlin and Heidelberg GmbH & Co. KG
Imprint:   Springer-Verlag Berlin and Heidelberg GmbH & Co. K
Weight:   0.890kg
ISBN:  

9783540561255

ISBN 10:   3540561250
Pages:   445
Publication Date:   14 December 1992
Audience:   College/higher education ,  Professional and scholarly ,  Postgraduate, Research & Scholarly ,  Professional & Vocational
Format:   Hardback
Publisher's Status:   Active
Availability:   Out of stock  
The supplier is temporarily out of stock of this item. It will be ordered for you on backorder and shipped when it becomes available.

Table of Contents

A. State of the Art.- 1. Introduction.- 1. Scope of the book.- 2. Nature of the theory of the firm and of this book.- 3. Outline of the book.- 2. A Survey of Dynamic Theories of the Firm.- 1. Introduction.- 2. Shareholders.- 3. Management.- 4. Employees.- 5. Labour market.- 6. Output market.- 7. Competitors.- 8. Lenders of debt money.- 9. Suppliers of assets.- 10. Government.- 11. Macro-economic data.- 12. Summary.- 3. Some Predecessors.- 1. Introduction.- 2. Investments and depreciation (Jorgenson).- 3. Investments and adjustment costs (Gould).- 4. Production and finance I (Leland).- 5. Finance and the value of the firm (Ludwig).- 6. Production and finance II (Lesourne & Leban).- 7. Optimal firm behaviour during a business cycle (Leban & Lesourne).- 8. Technological progress in vintage models of the firm.- 9. Summary.- B. Investment and Finance.- 4. A Dynamic Model of the Firm.- 1. Introduction.- 2. Production, sales and operating income.- 3. Financing and taxes.- 4. Policy of the firm.- 5. The model.- 6. Further assumptions.- 7. The Maximum Principle.- 8. Optimal solution.- 9. Basic trajectory.- 10. Consolidation.- 11. Summary.- 5. Investment and Finance.- 1. Introduction.- 2. Personal Taxation.- 2.1. The model.- 2.2. Optimal solution.- 2.3. Summary.- 3. Net present value concept.- 3.1. Corporate finance theory.- 3.2. NPV concept and the model of Chapter 4.- 3.3. Summary.- 4. Adjustment costs.- 4.1. The theory of adjustment costs.- 4.2. A self-financing firm facing convex adjustment costs.- 4.2.1. The model and its solution.- 4.2.2. NPV concept and further analysis.- 4.3. Summary.- 5. Summary.- C. Production.- 6. Production, Employment, Finance and Investment.- 1. Introduction.- 2.The model.- 3. Further assumptions.- 4. Optimal solution.- 5. Basic trajectory and consolidation.- 6. Depth investments.- 7. Depth investments and consolidation.- 8. Summary.- 7. A Further Analysis.- 1. Introduction.- 2. Optimal decision rules.- 2.1. Production.- 2.2. Financial structure.- 2.3. Investment and dividend.- 3. Environmental influence on the trajectory of the firm.- 3.1. Reallocations.- 3.2. Final output.- 3.3. Consolidation.- 3.4. Expansion.- 3.5. Substitution.- 3.6. Financial substitution.- 4. Inluence of (sets of) environmental parameters.- 4.1. Corporation profit tax rate.- 4.2. Investment grant rate.- 4.3. Abolishing investment grants.- 4.4. Financial parameters.- 4.5. Wage rate.- 5. Summary.- 8. Production, Pollution, Finance and Investment.- 1. Introduction.- 2. The model.- 3. Optimal trajectories.- 3.1. Introduction.- 3.1.1. Financing costs.- 3.1.2. Technology.- 3.1.3. Environmental policy.- 3.2. Weak environmental policy of the government.- 3.3. Strong environmental policy of the government.- 3.4. Total set of trajectories.- 4. Conclusions.- D. Dynamic and Risky Environment.- 9. Production, Finance and Investment During a Business Cycle.- 1. Introduction.- 2. Assumptions.- 3. The model and relevant paths.- 4. Optimal solution.- 4.1. Introduction.- 4.2. A 'light' recession.- 4.3. A 'moderate' recession.- 4.4. A 'severe' recession.- 5. Summary.- 10. Production and Investment with Technological Progress.- 1. Introduction.- 2.The model and its optimality conditions.- 2.1. Vintages and taxes.- 2.2. The model.- 2.3. Lifetime of the eldest vintage.- 2.4. Optimization problem.- 2.5. Optimality conditions.- 3. Scrapping condition.- 3.1. A general scrapping condition.- 3.2. Interpretation.- 3.3. Another derivation.- 4. Steady state solution.- 5. Limitations to the coupling procedure.- 6. Summary.- 11. Production, Finance and Investment When Demand is Uncertain.- 1. Introduction.- 2.The model.- 3. Solution.- 4. Summary.- 12. Epilogue.- Appendix 1. An Interpretation of the Maximum Principle.- 1. Introduction.- 2. Technical terms.- 3. The Maximum Principle of Pontryagin.- 4. Mixed control constraints.- 5. Pure state constraints.- 6. Problems with infinite horizon.- Appendix 2. Solutions of the Models of Chapter 3.- 1. Introduction.- 2. A general solution procedure.- 3. The model of Jorgenson.- 4. The model of Gould.- 5. The model of Ludwig.- 6. The model of Lesourne and Leban.- 7. The model (s) of Leban and Lesourne.- 8. The model of Nickell.- 9. Summary.- Appendix 3. Solution of the Model of Chapter 4: A Step by Step Description.- 1. A reduced form of the model.- 2. Optimality conditions.- 3. Infeasible paths.- 4. Feasible paths.- 5. Final paths.- 6. Coupling procedure.- 6.1. Strings ending with path 5.- 6.2. Strings ending with path 4.- 7. Summary.- Appendix 4. Solutions of the Models in Chapters 5, 6 and 8: The Main Lines.- 1. Personal taxation model.- 2. NPV formulas of the model of Chapter 4.- 3. Convex adjustment costs.- 3.1. Optimal trajectories.- 3.2. Net present value formulas.- 3.3. Extension of the planning period.- 3.4. Infinite time horizon.- 4. The model of Chapter 6.- 5. Pollution model.- 5.1. Reformulation of the model.- 5.2. Solution procedure.- Appendix 5. Specific Problems in Solving the Models of Chapters 9 and 10.- 1. Solution of the model of Chapter 9.- 1.1. Optimality conditions.- 1.2. String 1002D2-1.- 1.3. String 1-2-3-2-1.- 2. The Maximum Principle for the model in Chapter 10.- 2.1. The model.- 2.2. The trie.- 2.3. Necessary optimality conditions for a special case.- 2.4. Necessary conditions for the general model.- 3. Existence of steady state solution in Section 10.4.- Appendix 6. Stochastic Dynamic Programming and the Additional Solutions and Mathematical Proofs of Chapter 11.- 1. Stochastic dynamic programming.- 2. Additional solutions and mathematical proofs.- List of Symbols.- References.- Author Index.

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