On the Theory of Optimal Investment Decision

  title={On the Theory of Optimal Investment Decision},
  author={J. Hirshleifer},
  journal={Journal of Political Economy},
  pages={329 - 352}
  • J. Hirshleifer
  • Published 1958
  • Economics
  • Journal of Political Economy
  • This article is an attempt to solve (in the theoretical sense), through the use of isoquant analysis, the problem of optimal investment decisions (in business parlance, the problem of capital budgeting). The initial section reviews the principles laid down in Irving Fisher's justly famous works on interest to see what light they shed on two competing rules of behavior currently proposed by economists to guide business investment decisions - the present-value rule and the internal-rate-of return… CONTINUE READING
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