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Investment and Coordination in Oligopolistic Industries


  • Gilbert, Richard J.


We examine investment by firms in 24 chemical product industries to determine whether firms invest preemptively to achieve persistent increases in market share or whether there is evidence of behavior to maintain market share. The data indicate that investment reduces the probability that rival firms will expand capacity, but the effect is temporary. Large firms tend to maintain market share, while smaller firms tend to invest simultaneously with rivals. The role of preemptive investment is limited to that of permitting a firm to invest with a lower probability of redundant investment by rivals. Preemption does not allow a persistent increase in market share, but instead acts as a means by which firms may coordinate capacity investment to help avoid episodes of industry overcapacity.
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  • Gilbert, Richard J., 1987. "Investment and Coordination in Oligopolistic Industries," Department of Economics, Working Paper Series qt51b0f7sq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:econwp:qt51b0f7sq

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    References listed on IDEAS

    1. Buiter,Willem H. & Marston,Richard C., 1986. "International Economic Policy Coordination," Cambridge Books, Cambridge University Press, number 9780521337809, March.
    2. Cooper, Richard N., 1985. "Economic interdependence and coordination of economic policies," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 23, pages 1195-1234 Elsevier.
    3. Patrick J. Kehoe, 1986. "International policy cooperation may be undesirable," Staff Report 103, Federal Reserve Bank of Minneapolis.
    4. Miller, Marcus & Salmon, Mark, 1985. "Dynamic Games and the Time Inconsistency of Optimal Policy in Open Economies," Economic Journal, Royal Economic Society, vol. 95(380a), pages 124-137, Supplemen.
    5. Jeffrey A. Frankel, 1986. "The Sources of Disagreement Among International Macro Models and Implications for Policy Coordination," NBER Working Papers 1925, National Bureau of Economic Research, Inc.
    6. Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-564, October.
    7. Ishii, Naoko & McKibbin, Warwick & Sachs, Jeffrey, 1985. "The economic policy mix, policy cooperation, and protectionism: Some aspects of macroeconomic interdependence among the United States, Japan, and other OECD countries," Journal of Policy Modeling, Elsevier, vol. 7(4), pages 533-572.
    8. William H. Branson, 1986. "The Limits of Monetary Coordination As Exchange Rate Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 175-194.
    9. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
    10. Hamada, Koichi, 1976. "A Strategic Analysis of Monetary Interdependence," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 677-700, August.
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