The durability of physical capital assets in competitive industries can act as a hedge against overcapacity. Low-quality capital assets can help firms navigate periods of low demand by decreasing the impact of capital depreciation. The study developed a model to analyze investment behavior and output prices, finding that firms with less durable capital assets may have higher value in certain scenarios. The research also made predictions about equilibrium output prices and entry dynamics, which were supported by empirical data from U.S. manufacturing firms.