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Please use this identifier to cite or link to this item: http://purl.umn.edu/37516

Title: Strategic Investment and Excess Capacity: A Study of the Taiwanese Flour Industry
Authors: Ma, Tay-Cheng
Keywords: strategic investment
two-stage game
collusion
conjectural variation
JEL Codes: L13
Issue Date: 2005-05
Abstract: The Taiwanese flour industry’s capacity utilization rate has maintained an extremely low level of 40% for more than 20 years. This article sets up a two-stage game model and uses the strategic effect of the firm’s capital investment on its rivals’ outputs to explain the nature of this excess capacity. The model is tested with panel data from the Taiwanese flour industry by using non-linear three-stage least squares. The evidences indicate that a large capacity built in the past could have been used strategically to reduce other firms’ outputs, in the context of a concerted action among the incumbent firms.
URI: http://purl.umn.edu/37516
Identifiers: Pring ISSN 1514-0326
Online ISSN 1667-6726
Institution/Association: Journal of Applied Economics>Volume 8, Number 01, May 2005
Total Pages: 18
From Page: 153
To Page: 170
Collections:Volume 08, Number 1, May 2005

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