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Equilibrium Investment in an Industry with Moderate Investment Economies of Scale

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  • Hartley, Peter R
  • Kyle, Albert S

Abstract

The authors investigate a stationary equilibrium investment sequence in an industry where the costs of investment display initial economies of scale, but eventually decreasing returns to scale. Both the timing and size of new investments are choice variables, and they allow the industry structure to be as competitive as one could imagine given the cost conditions. The authors argue that competitive private firms will make new investments that are too early and too small. Their results have implications for the likely performance of industries, such as electricity, telecommunications, gas, and water supply, after deregulation or privatization. Copyright 1989 by Royal Economic Society.

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  • Hartley, Peter R & Kyle, Albert S, 1989. "Equilibrium Investment in an Industry with Moderate Investment Economies of Scale," Economic Journal, Royal Economic Society, vol. 99(396), pages 392-407, June.
    • Handle: RePEc:ecj:econjl:v:99:y:1989:i:396:p:392-407
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