Martin Bandulet, Karl Morasch
Incentives to Invest in Electronic Coordination: Under- or Overinvestment
in Equilibrium?
Abstract:
Do firms have proper incentives to invest in electronic coordination? We
discuss this question in an oligopoly model with a local firm and a distant
competitor that may reduce transport costs by investing in electronic coordination.
In a two-stage game with investment in the first stage and price or quantity
competition with differentiated products in the second stage we compare
profit maximizing investment with (constrained) welfare maximization by
a social planer. Depending on market demand, firm conduct and investment
costs either over- or underinvestment may result: The firm will overinvest
if the negative impact on its competitor exceeds the gain in consumer surplus.
This is shown to be especially likely under quantity competition with (almost)
homogenous products.
JEL: D43, D61, L13
Paper:
Paper available as pdf-file.
Beitrag Nr. 200, Volkswirtschaftliche Diskussionsreihe, Institut für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Dipl.-Volksw. Martin
Bandulet, University of Augsburg, Department of Economics, Universitätsstr.
16, D-86135 Augsburg, Phone +49-821598-4197, Fax +49-821-598-4230, E-Mail:
martin.bandulet@wiwi.uni-augsburg.de
PD Dr. Karl Morasch,
University of Augsburg, Department of Economics, Universitätsstr.
16, D-86135 Augsburg Phone: +49-821-598-4196; Fax +49-821-598-4230; Email:
karl.morasch@wiwi.uni-augsburg.de
v.
K., 06.03.2001