Dynamic Policies of the Firm: An Optimal Control Approach

This book belongs to the realm of dynamic theory of the firm. It discusses optimal investment, financing and production policies of the firm, that haveto deal with a diversity of aspects: alternative production techniques, financial constraints, technological progress, business cycles, uncertainty, environmental constraints, etc. 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 analysed while taking into account taxation on environmental pollution, business cycles, adjustmentcosts and technological progress. Results are obtained by using Optimal Control Theory. The models lead to descriptions of growth and decline patterns of firms like we meet them in practice: distinctive stages succeeding each other, each with its own emphasis on specific management policies (growth, consolidation, depth investments, abatementefforts, etc.).

The book is a contribution to the dynamic theory of the firm. It provides production, finance and investment decision rules, taking into account subjects like adjustment costs, financial constraints, costs of environmental pollution, technological progress, business cycles and uncertain demand.