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Investment Strategy and Growth in a New Market

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  • A. Michael Spence

Abstract

This paper studies the strategic interaction among firms in a growing market. It focuses upon the investment decisions of the firms. Central to the analysis is the idea that investment and growth for the firm are constrained by physical and financial factors. Firms that enter early and/or firms that can grow rapidly can make preemptive investments. The paper studies the optimal levels of preemptive investment and the implications for the long-run structure of the market. The analysis of optimal preemption is similar in spirit to the von Stackelberg equilibrium concept in oligopoly theory.

Suggested Citation

  • A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
  • Handle: RePEc:rje:bellje:v:10:y:1979:i:spring:p:1-19
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    1. Samet, Dov & Tauman, Yair, 1982. "The Determination of Marginal Cost Prices under a Set of Axioms," Econometrica, Econometric Society, vol. 50(4), pages 895-909, July.
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