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Investment interdependence and the coordination of lumpy investments: evidence from the British brick industry

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Author Info
Andrew Wood

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Abstract

The brick industry is characterized by regional markets, lumpy capacity increments and high fixed costs. In such an industry, the coordination of rival expansions in capacity can be crucial to the profitability of those expansions. Evidence from the British brick industry suggests that excess investments are generally avoided, but there is little support for existing theories to explain how this is achieved. The explanation for how coordination failures are avoided is based on firm heterogeneity, the regional dimension to the investment decision and the prospects for, and consequences of, growth by acquisition.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 1 (January)
Pages: 37-49
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Handle: RePEc:taf:applec:v:37:y:2005:i:1:p:37-49

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August. [Downloadable!] (restricted)
  2. Hay, Donald A & Liu, Guy S, 1998. "The Investment Behaviour of Firms in an Oligopolistic Setting," Journal of Industrial Economics, Blackwell Publishing, vol. 46(1), pages 79-99, March. [Downloadable!] (restricted)
  3. Richard J. Gilbert and Marvin Lieberman., 1987. "Investment and Coordination in Oligopolistic Industries," Economics Working Papers 8730, University of California at Berkeley.
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  4. Gallet, Craig & Schroeter, John, 2002. "The Effects of the Business Cycle on Oligopoly Coordination: Evidence from the U.S. Rayon Industry," Staff General Research Papers 5250, Iowa State University, Department of Economics.
  5. Christensen, Laurits Rolf & Caves, Richard E, 1997. "Cheap Talk and Investment Rivalry in the Pulp and Paper Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 45(1), pages 47-73, March. [Downloadable!] (restricted)
  6. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, vol. 36(8), pages 1601-1626, December. [Downloadable!] (restricted)
  7. Booth, D L, et al, 1991. "An Empirical Model of Capacity Expansion and Pricing in an Oligopoly with Barometric Price Leadership: A Case Study of the Newsprint Industry in North America," Journal of Industrial Economics, Blackwell Publishing, vol. 39(3), pages 255-76, March. [Downloadable!] (restricted)
  8. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alan E. H. Speight & Piers Thompson, 2006. "Is investment time irreversible? Some empirical evidence for disaggregated UK manufacturing data," Applied Economics, Taylor and Francis Journals, vol. 38(19), pages 2265-2275, October. [Downloadable!] (restricted)
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