LSE LSE Research Laboratory LSE
LSE Research Laboratory (RLAB)

Abstract for:

Comparative Statics for a Partial Equilibrium Model of Investment with Wicksell-Complementary Capital Inputs

Anthony  Horsley,  Andrew J  Wrobel,   1996
Paper No' TE/1996/302:
Save Reference as: BibTeX BibTeX File | Endote EndNote Import File
Keywords:

JEL Classification:

Is hard copy/paper copy available? NO - Paper Copy Out Of Print.
This Paper is published under the following series: Theoretical Economics
Share this page: Google Bookmarks Google Bookmarks | Facebook Facebook | Twitter Twitter

Abstract:

A partial competitive equilibrium model is set up for the determination of profit-maximising investment in a production technique which has constant returns to scale itself, but at least one of its inputs has an increasing price schedule, so that its price is determined in equilibrium. Comparative statics analysis of the solution shows that the cross-effects of unit input costs on equilibrium investment are negative if the inputs are Wicksell technical complements. This is so in the motivating application (pumped storage, especially of energy), since this is a two-input example. For the case of just one equilibrium-priced input, a shift in its price schedule changes the scale of investment but not input proportions (with or without the complementary assumption). When applicable, this result greatly simplifies the re-optimisation of existing plants tied to particular locations.