The effects of market structure on industry growth: rivalrous nonexcludable capital
Mirman, Leonard J.
Journal of Economic Theory
We analyze imperfect competition in dynamic environments where firms use rivalrous but nonexcludable industry-specific capital that is provided exogenously. Capital depreciation depends on utilization, so firms influence the evolution of the capital equipment through more or less intensive supply in the final-goods market. Strategic incentives stem from, (i) a dynamic externality, arising due to the non-excludability of the capital stock, leading firms to compete for its use (rivalry), and, (ii) a market externality, leading to the classic Cournot-type supply competition. Comparing alternative market structures, we isolate the effect of these externalities on strategies and industry growth.
Author's draft issued as working paper dated September 2005. Final version available online at http://www.sciencedirect.com/
Journal of Economic Theory, Vol. 133, March 2007, pp. 199-218