The effect of time-to-build on strategic investment under uncertainty

• 成果类型: Article
• 署名作者: Pacheco-de-Almeida, G; Zemsky, P
• 署名单位: New York University
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.2307/3087448
• 发表日期: 2003
• 页码: 166-182
• 关键词: cournot duopoly; COMMITMENT; CHOICE; entry

摘要

We show that time-to-build, which creates a lag between the decision to invest and production, is an important element of industry structure. We-study a multiperiod investment game where there is demand uncertainty. Adding time-to-build to the model alters the classic tradeoff between making strategic commitments and exploiting the option to wait. Furthermore, time-to-build gives rise to novel equilibria in which firms invest incrementally, which contrasts with most prior work on multiperiod investment games in which firms invest only once. We show how time-to-build affects firm heterogeneity, investment timing, the option value of waiting, the evolution of prices, and social welfare.