A Game of Competitive Investment: Over-capacity and Under-learning
نویسندگان
چکیده
We consider the situation where a number of firms decide their individual capacity investment levels. The total sum of these levels determines the total return, which the firms share in proportion to their contributions. Prior to their commitments, firms may spend efforts on learning a size indicator of the market. Using this model, we can explain the over-capacity phenomenon that appeared time and again in a slew of industries. The competitive learning aspect of the situation sheds light on the chronic neglect of due diligence when companies are supposed to conduct demand-forecast studies but do not do so.
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