Market Structure Impacts Investment Incentives, Decreases Total Investment Levels
The article explores how companies decide how much to invest in their production capacity when they are unsure about future market conditions. It shows that in a competitive market, companies invest the most, while in an oligopoly (few big players), investment is lower. The study also finds that when a social planner intervenes only during production, it can actually reduce total investment compared to letting the market operate freely.