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The Investment Behaviour of Firms in an Oligopolistic Setting

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  • Donald A. Hay
  • Guy S. Liu

Abstract

Industrial organization theory has identified strategic investment in capacity as an important element in competition in oligopolistic markets. In the paper we specify a model of oligopolistic investment behaviour, and test it with panel data for 114 firms in 15 narrowly defined UK manufacturing industries in the 1970s and 1980s. The industries are distinguished according to their market characteristics as fragmented, dominant firm and dominant group sectors. The results indicate behaviour which is noncooperative in fragmented sectors, cooperative in dominant group sectors and competitive in dominant firm sectors.

Suggested Citation

  • Donald A. Hay & Guy S. Liu, 1998. "The Investment Behaviour of Firms in an Oligopolistic Setting," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 79-99, March.
    • Handle: RePEc:bla:jindec:v:46:y:1998:i:1:p:79-99
    DOI: 10.1111/1467-6451.00062
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    Cited by:

    1. Sadaf Ali & Ajid ur Rehman & Muhammad Jawad & Munazza Naz, 2024. "Product market competition and investment efficiency nexus with mediating effect of firm risk-taking in Pakistan," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(3), pages 488-499, September.
    2. Liu, Guy & Gregoriou, Andros & Bo, Yibo, 2020. "How do markets value stock liquidity? Comparative evidence from the UK, the US, Germany and China," Economics Letters, Elsevier, vol. 186(C).
    3. Andrew Wood, 2005. "Investment interdependence and the coordination of lumpy investments: evidence from the British brick industry," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 37-49.
    4. Jiang, Fuxiu & Kim, Kenneth A. & Nofsinger, John R. & Zhu, Bing, 2015. "Product market competition and corporate investment: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 196-210.

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