Excess Capacity: A Note

Authors

Sougata Poddar, Chapman UniversityFollow

Document Type

Article

Publication Date

2003

Abstract

In a two period model of strategic entry deterrence where the incumbent firm moves before the entrant by installing capacity for production, Dixit (1980) argued that in a (perfect) equilibrium excess capacity would not be observed, contradicting Spence's (1977) result on the same issue. In this note, we show that Dixit may not always remain true when we allow for demand uncertainty.

Comments

This article was originally published in Keio Economic Studies, volume 40, issue 1, in 2003.

Recommended Citation

Poddar, S. (2003). Excess capacity: A Note. Keio Economic Studies, 40(1), 75-83.

Peer Reviewed

1

Copyright

Keio Economic Society