Strategic Investment In Dynamic Oligopoly

The study of this article concentrates on the strategic investment in dynamic oligopoly. And the studies cover mathematic models of strategic investment, as well as three applications in capacity limitation, R&D competition, and investment in disinformation. Certainly, our studies employ the game-theoretical approach as analysis methodology.The purpose of this study is to exploit the theoretical foundations and applications of strategic investment. It also provides a benchmark to the analysis of empirical study, regulation and public policy, competitive strategies in strategic investment.Part I is an introduction and literature review to the study topic of strategic investment.Part II, at first, we introduce a basic mathematical model of strategic investment with two-period and two-firm settings. In the next, a stochastic entry cost of the entrant firm is introduced. Our analysis will be based on the theoretical foundations of this part.Part III describe an entry with capacity limitation that a less efficient entrant firm with judiciously limitation of capacity is accommodated by the incumbent with self-interest incentive. The model explains an entrant firm how to limit its capacity to gain market share. This is an application of strategic investment in physical capital.Part IV study the strategic investment in R&D competition, which is an application of intangible assets. We derive aconclusion that the incumbent firm has the incentive to underinvestment both in entry-accommodation and entry-deterrence assuming that the results of R&D is stochastic and the probability of success is the function of R&D investment.PartV study how a firm invest in disinformation to deter entry. Our analysis based on also a two-period and two-firm model. We restrict that all aspects of the market are known with certainty except that the entrant only know the incumbent's cost with probability. In the separating equilibrium, the incumbent's cost is revealed to the potential firm. So that limit-pricing need not limit entry. The probability that entry occur is just the probability that the incumbent is high cost; In pooling equilibrium the low cost incumbent charges its monopoly price and the high-cost one engages in limit pricing to deter entry. The incumbent firm manipulate price in a way that does not reveal cost information.Part VI states the concluding remarks. Especially, this part provides some implications and the direction of extensions.