A game of competitive investment: Overcapacity and underlearning

Jian Yang, Yusen Xia, Junmin Shi

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

We consider the situation in which 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. Before their commitments, firms may spend efforts on learning a size indicator of the market. Using this model, we can explain the overcapacity phenomenon that appeared time and again in numerous industries. The competitive learning aspect of the situation sheds light on the chronic neglect of due diligence when companies are supposed to conduct demandforecast studies but do not do so.

Original languageEnglish (US)
Title of host publicationSupply Chain Management and Logistics
Subtitle of host publicationInnovative Strategies and Practical Solutions
PublisherCRC Press
Pages197-229
Number of pages33
ISBN (Electronic)9781466577886
ISBN (Print)9781138893252
DOIs
StatePublished - Jan 1 2015

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)
  • Engineering(all)

Keywords

  • Investment game
  • Overcapacity
  • Underlearning

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