SSE/EFI Working Paper Series in Economics and Finance
No 272:
Endogenous Timing of Investments Yields Modified Stackelberg Outcomes
Mats A. Bergman ()
Abstract: This paper deals with capacity constrained price
competition in a duopoly model. The model resembles that in Kreps and
Scheinkman (1983), but the timing of the investment/capacity choice is
endogenous. In equilibrium, one of the firms will invest to become the
Stackelberg leader, although the ratio between the leader's and the
follower's capacities is smaller than in the standard Stackelberg outcome.
Capacity is built too early, resulting in welfare losses. The leader and
the follower will earn equal profits, except when capacity costs are
small.
Keywords: Bertrand; Cournot; Stackelberg; strategic investment; excess capacity; games of timing; endogenous entry; rent equalization.; (follow links to similar papers)
JEL-Codes: D43; L13; (follow links to similar papers)
27 pages, October 22, 1998
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
hastef0272.pdf.zip 
(zipped) (101kB)
hastef0272.pdf (114kB)
hastef0272.ps.zip PKZipped PostScript (134kB)
hastef0272.ps PostScript file (895kB)
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Björn Thodenius ()
Report other problems with accessing this service to Sune Karlsson ()
or Björn Thodenius ().
Programing by
Design by Joachim Ekebom
