Econometrica: Jul 1980, Volume 48, Issue 5

Industry Structure and Cost-Reducing Investment

https://doi.org/0012-9682(198007)48:5<1187:ISACI>2.0.CO;2-1
p. 1187-1210

M. Therese Flaherty

A dynamic noncooperative game in which firms choose output and cost-reducing investment sequences is developed. The sequences exhibit several properties of manufacturing industries. Several steady states exist. Under some reasonable conditions only industry structures in which firms have different market shares can be locally stable steady states. So the model presents one explanation of the source of differences among firms in homogeneous good oligopolies.

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