In this study, we use Shleifer and Vishny (1992) analytical
framework and ideas to investigate duopolys
resale price of specific assets and the optimal scale of investment in the case
of variable investment model with decreasing returns to scale. We show that:
(1) the firms resale price of
specific assets in distress related to the scale of investment of the another
firm with not in distress in industry, (2) the value of collateral and incentive
to invest of the firm in distress hinges on whether another firm under consideration
is investing. The optimal investment scales of firm depend on other oligopolistic
in the industry, (3) in symmetric equilibrium, the optimal investment scales
between duopoly is interactive to each other under decreasing returns to scale
, the solution of optimal investment scale is a Nash equilibrium.
Guo Qiuping, Tian Cunzhi and Li Jiangqi, 2013. Study of Specific Assets
Investment and Resale Price-based on the Perspectives of Decreasing Return to
Scale. Journal of Applied Sciences, 13: 2457-2462.