Excess Capacity in Oligopoly with Sequential Entry
We analyse sequential entry in a quantity-setting oligopoly model. Firms have the option to adopt either a productive capacity which is optimal at the time of entry or a smaller one. This capacity may be suitable either for the steady state or just some time after entry. In the latter case firms never carry idle capacity, while in the former they keep spare capacity in the steady state. In the Cournot-Nash setting, a subgame perfect equilibrium may result in firms investing in capacity that will turn out to be idle later, depending on the size of the market and the rental price of capital. Older firms have larger spare capacity than later entrants and we can tell the age of a firm from its unused capacity. If market size is large enough, excess capacity turns out to be socially optimal.
|Date of creation:||2000|
|Contact details of provider:|| Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna|
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
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.:
- Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-33, March.
- Fishman, Arthur & Rob, Rafael, 1995.
"The Durability of Information, Market Efficiency and the Size of Firms,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 19-36, February.
- Arthur Fishman & Rafael Rob, 1993. "The durability of information, market efficiency, and the size of firms," Working Papers 94-4, Federal Reserve Bank of Philadelphia.
- Anderson, Simon P & Engers, Maxim, 1994. "Strategic Investment and Timing of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 833-53, November.
- Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
- Nachbar, John H & Petersen, Bruce C & Hwang, Inhak, 1998.
"Sunk Costs, Accommodation, and the Welfare Effects of Entry,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 46(3), pages 317-32, September.
- Sachbar, J.H. & Peterson, B.C. & Hwang, I., 1997. "Sunk Costs, Accommodation, and the Welfare Effects of Entry," Washington University 97-03, Business, Law and Economics Center, John M. Olin School of Business, Washington University.
- Gabszewicz, J.J. & Poddar, S., .
"Demand fluctuations and capacity utilization under duopoly,"
CORE Discussion Papers RP
1269, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jean J. Gabszewicz & Sougata Poddar, 1997. "Demand fluctuations and capacity utilization under duopoly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 131-146.
- GABSZEWICZ, Jean J. & PODDAR , Sougata, 1995. "Demand Fluctuations and Capacity Utilization under Duopoly," CORE Discussion Papers 1995051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Fishman, Arthur & Rob, Rafael, 1999. "The Size of Firms and R&D Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 915-31, November.
- Boyer, Marcel & Moreaux, Michel, 1986. "Perfect competition as the limit of a hierarchical market game," Economics Letters, Elsevier, vol. 22(2-3), pages 115-118.
- Somma, Ernesto, 1999.
"The effect of incomplete information about future technological opportunities on pre-emption,"
International Journal of Industrial Organization,
Elsevier, vol. 17(6), pages 765-799, August.
- Ernesto Somma, . "The Effect of Incomplete Information about Future Technological Opportunities on Pre-Emption," Discussion Papers 95/41, Department of Economics, University of York.
- d'Aspremont, C. & Gerard-Varet, L. -A., 1980.
"Stackelberg-solvable games and pre-play communication,"
Journal of Economic Theory,
Elsevier, vol. 23(2), pages 201-217, October.
- d'ASPREMONT, C. & GERARD-VARET, L.-A., . "Stackelberg-solvable games and pre-play communication," CORE Discussion Papers RP 425, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Hamilton, Jonathan H. & Slutsky, Steven M., 1990.
"Endogenous timing in duopoly games: Stackelberg or cournot equilibria,"
Games and Economic Behavior,
Elsevier, vol. 2(1), pages 29-46, March.
- Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
- Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
- C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:384. 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: (Dipartimento Scienze Economiche, Universita' di Bologna)
If references are entirely missing, you can add them using this form.