IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Strategic investment and excess capacity: A study of the Taiwanese flour industry

The Taiwanese flour industry’s capacity utilization rate has maintained an extremely low level of 40% for more than 20 years. This article sets up a two-stage game model and uses the strategic effect of the firm’s capital investment on its rivals’ outputs to explain the nature of this excess capacity. The model is tested with panel data from the Taiwanese flour industry by using non-linear three-stage least squares. The evidences indicate that a large capacity built in the past could have been used strategically to reduce other firms’ outputs, in the context of a concerted action among the incumbent firms.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): VIII (2005)
Issue (Month): (May)
Pages: 153-170

in new window

Handle: RePEc:cem:jaecon:v:8:y:2005:n:1:p:153-170
Contact details of provider: Postal: Av. Córdoba 374, (C1054AAP) Capital Federal
Phone: (5411) 6314-3000
Fax: (5411) 4314-1654
Web page:

More information through EDIRC

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.:

as in new window
  1. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  2. Davidson, Carl & Deneckere, Raymond J, 1990. "Excess Capacity and Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 521-41, August.
  3. Osborne, Martin J. & Pitchik, Carolyn, 1983. "Cartels, Profits, and Excess Capacity," Working Papers 83-09, C.V. Starr Center for Applied Economics, New York University.
  4. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  5. Martin J. Osborne & Carolyn Pitchik, 1983. "Profit-Sharing in a Collusive Industry," Cowles Foundation Discussion Papers 668, Cowles Foundation for Research in Economics, Yale University.
  6. Beth Allen & Raymond Deneckere & Tom Faith & Dan Kovenock, 1994. "Capacity Precommitment as a Barrier to Entry:A Bertrand-Edgeworth Approach," Industrial Organization 9411002, EconWPA, revised 14 Nov 1994.
  7. Dixon, Huw, 1986. "Strategic Investment with Consistent Conjectures," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 111-28, Suppl. No.
  8. Roller, Lars-Hendrik & Sickles, Robin C., 2000. "Capacity and product market competition: measuring market power in a 'puppy-dog' industry," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 845-865, August.
  9. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
  10. Osborne, Martin J. & Pitchik, Carolyn, 1986. "Price competition in a capacity-constrained duopoly," Journal of Economic Theory, Elsevier, vol. 38(2), pages 238-260, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cem:jaecon:v:8:y:2005:n:1:p:153-170. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valeria Dowding)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.