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Time-to-build investment and uncertainty in oligopoly
Dewit, Gerda; Leahy, Dermot
This paper examines how time to build alters strategic investment behaviour under oligopoly. Facing demand uncertainty, firms decide whether to invest early or wait until uncertainty has been resolved. A game that captures time-to-build investment is contrasted with another one in which investment is quick in place. We show that a time lag between when and how much to invest reduces the incentive to delay. When investment requires time to complete, early investment occurs more to avoid becoming a follower than to become a strategic investment leader. The opposite is true with quick-in-place investment. A brief welfare analysis is provided. ASEAN-EC Management Centre (AEMC)
Keyword(s): Time-to-build investment; Uncertainty; Strategic commitment; Flexibility; Oligopoly; D80; L13; Investments; Oligopolies
Publication Date:
Type: Working paper
Peer-Reviewed: Unknown
Language(s): English
Institution: University College Dublin
Publisher(s): University College Dublin. School of Economics
File Format(s): other; application/pdf
First Indexed: 2012-08-25 05:22:49 Last Updated: 2018-10-11 15:44:41