Capital Accumulation of a Firm
نویسندگان
چکیده
Using standard control theory in determining the firm's optimal dynamic investment decisions it turns out that it is always optimal to approach a long run optimal level of capital. In some cases, this equilibrium is reached within finite time, but usually it will be approached asymptotically. Also a necessary condition is determined under which history dependent equilibria can occur. Some of them are saddle-point equilibria and others are unstable nodes or spirals (focuses). These history dependent equilibria can be identified as being good or bad for society. We show that it is possible to eliminate bad equilibria through government intervention.
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