We model capacity-building investments in a homogeneous product duopoly facing uncertain demand growth. Capacity building is achieved through the addition of production units that are durable and lumpy and whose cost is irreversible. While building their capacity over time, firms compete à la Cournot in the product market given their installed capacity. There is no exogenous order of moves, no commitment regarding future decisions, and no finite horizon. We investigate Markov Perfect Equilibrium (MPE) paths of the investment game, which may include episodes during which firms invest at different times, a preemption pattern, and episodes in which firms invest simultaneously, a tacit collusion pattern. These episodes may alternate and are typically several. When firms have yet to invest in capacity, the sole pattern that is MPE-compatible is a preemption episode: firms invest at different times but have equal value. The first such investment may occur earlier and therefore be riskier than socially optimal. When both firms hold capacity, tacit collusion episodes may be MPE-compatible: firms invest simultaneously at a postponed time (hence holding back production in the meantime), thereby generating an investment wave in the industry. Such investment episodes are more likely with higher demand volatility, faster market growth, and lower cost of capital (discount rate).

Voir le document

Dernières publications

2017RP-04 RP
Fonctionnement du marché des assurances privées de personnes dans le cadre de l’assurance médicaments et son encadrement réglementaire au Québec
Mélanie Bourassa Forcier, Pierre-Carl Michaud, Aurélie Côté-Sergent, Stéphanie Boulenger, Camille Lachance Gaboury et Claire Abbamonte
Voir le document

2017RP-04A RP
Fonctionnement du marché des assurances privées de personnes dans le cadre de l’assurance médicaments et son encadrement réglementaire au Québec (ANNEXES)
Mélanie Bourassa Forcier, Pierre-Carl Michaud, Stéphanie Boulenger, Aurélie Côté-Sergent, Claire Abbamonte et Camille Lachance Gaboury
Voir le document

2017s-12 CS
Policy relevance of applied economist: Examining sensitivity and inferences
Maurice Doyon, Stéphane Bergeron et Lota Dabio Tamini
Voir le document

2017RP-03 RP
La surqualification professionnelle chez les diplômés des collèges et des universités : État de la situation au Québec
Brahim Boudarbat et Claude Montmarquette
Voir le document

2017s-11 CS
The social cost of contestable benefits
Arye Hillman et Ngo Van Long
Voir le document


Centre interuniversitaire de recherche en analyse des organisations
1130 rue Sherbrooke Ouest, suite 1400
Montréal, Québec (Canada) H3A 2M8
(514) 985-4000
(514) 985-4039
reception@cirano.qc.ca

© 2017 CIRANO. Tous droits réservés.



Partenaire de :