Strategic Investment Decisions in a Continuous- Time Dynamic Model with Complementary Goods
Pp. 88-97 (10)
This chapter considers a continuous-time infinite-horizon duopoly model
with complementary products. The chapter investigates the optimal level of labour
investment by duopoly firms in a new complementary product industry. Based on the
analysis of the model, it is shown that there exist multiple perfect equilibrium outcomes
where both firms invest beyond their steady-state reaction curves.
Complementary goods, continuous-time dynamic model, earlystopping
equilibrium, labour investment, late-stopping equilibrium, noncooperative
game, perfect equilibrium, steady-state reaction curves, strategic complementarity,
strategic investment decisions.
Institute for Basic Economic Science, 2-15-12 Hanjo, Minoo, Osaka 562-0044, Japan.