Economics, Econometrics and Finance
4 years ago

Competition in investment game leads to delayed industry growth waves

International Journal of Industrial Organization
A dynamic duopoly investment game without commitment under uncertain market expansion
Marcel Boyer, Pierre Lasserre, Michel Moreaux

Paper Summary

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The article explores how companies invest in new production units to meet uncertain market demand. They compete in selling products while expanding their capacity, sometimes investing at different times or together. Early investments may be riskier than ideal, and simultaneous investments can lead to industry growth. This is more likely with volatile demand, fast market growth, and low costs.