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Journal of Applied Sciences
  Year: 2013 | Volume: 13 | Issue: 13 | Page No.: 2457-2462
DOI: 10.3923/jas.2013.2457.2462
Study of Specific Assets’ Investment and Resale Price-based on the Perspectives of Decreasing Return to Scale
Guo Qiuping, Tian Cunzhi and Li Jiangqi

Abstract:
In this study, we use Shleifer and Vishny (1992) analytical framework and ideas to investigate duopoly’s 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 firm’s 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.
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How to cite this article:

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.

DOI: 10.3923/jas.2013.2457.2462

URL: http://scialert.net/abstract/?doi=jas.2013.2457.2462

 
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