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

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  • Andrew Wood

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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  • Andrew Wood, 2005. "Investment interdependence and the coordination of lumpy investments: evidence from the British brick industry," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 37-49.
  • Handle: RePEc:taf:applec:v:37:y:2005:i:1:p:37-49
    DOI: 10.1080/0003684042000287646
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    References listed on IDEAS

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    1. Richard J. Gilbert & Richard G. Harris, 1984. "Competition with Lumpy Investment," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 197-212, Summer.
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    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, Wiley Blackwell, vol. 39(3), pages 255-276, March.
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    Cited by:

    1. Yang, Shu-Jung Sunny & Anderson, Edward James, 2014. "Competition through capacity investment under asymmetric existing capacities and costs," European Journal of Operational Research, Elsevier, vol. 237(1), pages 217-230.
    2. Ulrich Doraszelski & Mark Satterthwaite & Lauren Xiaoyuan Lu & David Besanko, 2009. "Lumpy Capacity Investment and Disinvestment Dynamics," 2009 Meeting Papers 106, Society for Economic Dynamics.
    3. Besanko, David & Doraszelski, Ulrich & Lu, Lauren Xiaoyuan & Satterthwaite, Mark, 2010. "On the role of demand and strategic uncertainty in capacity investment and disinvestment dynamics," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 383-389, July.

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