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Technological modernization under resource scarcity
Author(s) -
Hritonenko Natali,
Yatsenko Yuri
Publication year - 2011
Publication title -
optimal control applications and methods
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 44
eISSN - 1099-1514
pISSN - 0143-2087
DOI - 10.1002/oca.992
Subject(s) - modernization theory , resource (disambiguation) , capital (architecture) , scarcity , economics , industrial organization , business , natural resource economics , economic system , market economy , economic growth , computer science , computer network , archaeology , history
SUMMARY A nonlinear optimal control problem describes the capital modernization strategy of a firm under improving technology and restrictions on available resources. The restricted resource may be space, land, labor, finance, or environmental pollution. The authors reveal a complete qualitative picture of optimal regimes and show that the only profitable long‐run growth scenario uses the entire available resource and involves capital modernization. It is shown that a high price of resource or capital suppresses the technology adoption by firms and leads to the firm shutdown. In contrast, resource regulation promotes scrapping of obsolete capital and adoption of new technology and stabilizes the growth of all firms in the industry. Copyrightcopyright 2011 John Wiley & Sons, Ltd.