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Journal Article

Investment Strategy and Growth in a New Market

A. Michael Spence
The Bell Journal of Economics
Vol. 10, No. 1 (Spring, 1979), pp. 1-19
Published by: RAND Corporation
DOI: 10.2307/3003316
Stable URL: http://www.jstor.org/stable/3003316
Page Count: 19
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Investment Strategy and Growth in a New Market
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Abstract

This paper studies the strategic interaction among firms in a growing market. It focuses upon the investment decisions of the firms. Central to the analysis is the idea that investment and growth for the firm are constrained by physical and financial factors. Firms that enter early and/or firms that can grow rapidly can make preemptive investments. The paper studies the optimal levels of preemptive investment and the implications for the long-run structure of the market. The analysis of optimal preemption is similar in spirit to the von Stackelberg equilibrium concept in oligopoly theory.

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