A Computable Dynamic Oligopoly Model of Capacity Investment

Gautam Gowrisankaran and Philipp Schmidt-Dengler

No 32399, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We consider widely used dynamic models where every period, each agent receives a private information shock to investment marginal cost and chooses among many ordered investment levels. We provide a computationally fast method to calculate optimal investment probabilities given value functions. Our method finds shock cutoffs between investment choices, accounting for the possibility that some levels are dominated. Other methods to compute these models may result in non-existence of pure strategy equilibrium or only work under restrictive assumptions. Multinomial logit models with choice-specific shocks can lead to counterintuitive predictions. Our method is useful to researchers estimating dynamic models of investment.

JEL-codes: C57 C63 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth and nep-ind
Note: IO
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w32399.pdf (application/pdf)

Related works:
Working Paper: A Computable Dynamic Oligopoly Model of Capacity Investment (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32399

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32399

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().