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Investment coordination and demand complementarities

Author

Listed:
  • Jean-Marie Baland

    (C.R.E.D., University of Namur, 8 Rempart de la Vierge, B-5000 Namur, BELGIUM)

  • Patrick Francois

    (Department of Economics, Queen's University, Kingston, Ontario, K7L 3N6, CANADA)

Abstract

This paper establishes necessary conditions for demand complementarity to imply investment coordination failure and explores the welfare implications of coordinated investment. Our main results caution against demand complementarities as a motive for investment coordination. We find that: 1) generally, a strict notion of complementarity (Hicks) is necessary for the existence of an investment coordination problem and 2) that when the problem does exist, coordination lowers social welfare without countervailing sectoral asymmetries.

Suggested Citation

  • Jean-Marie Baland & Patrick Francois, 1999. "Investment coordination and demand complementarities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(2), pages 495-505.
    • Handle: RePEc:spr:joecth:v:13:y:1999:i:2:p:495-505
    Note: Received: June 19, 1996; revised version: December 5, 1997
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    Cited by:

    1. Gerda Dewit & Dermot Leahy, 2018. "Attracting Foreign Direct Investment in Infrastructure," Economics Department Working Paper Series n290-18.pdf, Department of Economics, National University of Ireland - Maynooth.
    2. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.

    More about this item

    Keywords

    The Big Push · Coordination failures.;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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