Learning and Capacity Expansion under Demand Uncertainty
A competitive, dynamic model of entry into a new industry is set up and both its positive and normative aspects are studied. The main assumptions are that entry is sequential, that it occurs under imperfect information on the size of the market, and that better information becomes available as time goes on. The major results reported here (under suitable restrictions) are that the equilibrium rate of entry is monotonically decreasing over time and that--at any given point in time--it is smaller than the socially optimal one. Copyright 1991 by The Review of Economic Studies Limited.
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Volume (Year): 58 (1991)
Issue (Month): 4 (July)
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