Demand Growth and Strategically Useful Idle Capacity

Posted: 27 Jan 2010

See all articles by Jack Robles

Jack Robles

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance

Date Written: 2000

Abstract

This paper presents a model of an incumbent firm and a potential entrant. If entry occurs, then competition proceeds through Cournot quantity competition. My model, like those of (e.g.) Dixit and Ware, includes a strategic use for capacity prior to entry. However, it differs in that I consider a two period model, in which second period demand is larger than first period demand. I show that demand growth can result in a use for idle capacity. This result does not require the assumption that firms compete in strategic complements, and therefore works with, e.g., linear demand.

Keywords: Demand Growth, Idle Capacity, Firm, Entrant, Cournot, Strategy

JEL Classification: D21, D24, D43, L10, L41

Suggested Citation

Robles, Jack, Demand Growth and Strategically Useful Idle Capacity (2000). Available at SSRN: https://ssrn.com/abstract=1542945

Jack Robles (Contact Author)

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
311
PlumX Metrics