Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
958045 | Journal of Economics and Business | 2006 | 19 Pages |
Abstract
This paper examines firms' investment-timing decisions in an oligopolistic set-up. Facing demand uncertainty, firms decide whether to invest early or wait until uncertainty has been resolved. We show that the precise form that investment commitment takes matters for the investment-timing outcomes that emerge. When firms can commit immediately to the final investment level, investment leadership may occur and early investment is referred to as being primarily “aggressive”. By contrast, the presence of a time lag between when and how much firms invest yields symmetric investment-timing outcomes only; we argue that early investment is mainly “defensive” in that case.
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Authors
Gerda Dewit, Dermot Leahy,