The effect that investment lags has on the uncertainty-investment relationship is studied by modifying the Bar-Ilan and … small, uncertainty affects investment negatively; (ii) A sufficiently large time lag engenders an inverse u …-shape relationship between the degree of uncertainty and the profit level that triggers investment; (iii) When such an inverse u- shape …

The role that Bernanke’s Bad News Principle plays in the modern theory of investment under uncertainty is analyzed. The … analysis shows that the actual investment dilemma is that by delaying investment firms trade off a higher present value of … earnings for a lower present value of the investment cost, in contrast to previous interpretations of this dilemma. The …