Optimum Strategy and Defensive Investment of Firm in Duopoly Market: Strategy Analysis of Manufacturing Industry under Competition

Abstract

In equilibrium duopoly market, it is expected that the market share of each firm will change according to the investment of follower firm. Influence on the project value and investment probability, due to the change in market share, is one of the major concerns for the management. In this paper, the payoff structure of each firm, as a consequence of the variance in market share after investment as well as investment scale (unit), will be analyzed. In a market in which certain share will be lost if one does not invest, tendency for preemptive investment, due to instinctive sense of fear losing the market, is often seen in a real decision making. In this paper, also optimality and/or preferability of such decision making will be discussed.