Time-to-build investment and uncertainty in oligopoly

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Title: Time-to-build investment and uncertainty in oligopoly
Authors: Dewit, Gerda
Leahy, Dermot
Permanent link: http://hdl.handle.net/10197/1304
Date: Feb-2002
Abstract: 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.
Funding Details: ASEAN-EC Management Centre (AEMC)
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP02/07
Keywords: Time-to-build investmentUncertaintyStrategic commitmentFlexibilityOligopoly
Subject LCSH: Investments
Other versions: http://www.ucd.ie/economics/research/papers/2002/WP02.07.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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