Investment Coordination and Demand Complementarities

Jean-Marie Baland and Patrick Fracois
Authors registered in the RePEc Author Service: Patrick Francois ()

No 933, Working Paper from Economics Department, Queen's University

Abstract: This paper analyzes the possibility of investment coordination leading to outcomes which dominate non-investment equilibria in the presence of monopolistic competition. We establish when complementarity leads to investment coordination failures and explore the welfare implications of coordinated investment. Our main results caution against demand complementarities as a motive for investment coordination. We find that: 1) generally, a strict notion of complementarity (Hicks) is necessary for the existence of an investment coordination problem and 2) that when the problem does exist, coordination often lowers social welfare.

JEL-codes: L13 L16 O14 O33 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1996-10
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http://qed.econ.queensu.ca/working_papers/papers/qed_wp_933.pdf First version 1996 (application/pdf)

Related works:
Journal Article: Investment coordination and demand complementarities (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:933

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