INVESTMENT IN FIXED CAPITAL AND COMPETITIVE INDUSTRY DYNAMICS

This paper explores the possibilities for complex dynamic behaviour in an industry where a fixed capital good, once acquired and installed, is specific to that industry. A central theme is to understand the sorts of factors which can impose bounds on the behaviour of market price and which can impart stability to the system. The analysis highlights the significance not only of the durability and specificity of physical capital goods but also of capacity (under-) utilisation decisions and of the cautiousness of producers when expanding their capacities.