Competition and irreversible investments

Incumbent monopolists frequently claim that the introduction of competition will reduce future profits and therefore delay future investments. In this paper we show, that not only is this not generally true, but in the oligopolistic industry model of Dixit and Pindyck [Investment under Uncertainty, 1994] this is never the case. We extend this result to situations in which investments have positive externalities and situations in which the monopolist has multiple investment opportunities. (C) 2002 Elsevier Science B.V. All rights reserved.