ABSTRACT
ABSTRACT We consider the situation in which a number of firms decide their individual capacity investment levels. The total sum of these levels determines the total return, which the firms share in proportion to their contributions. Before their commitments, firms may spend efforts on learning a size indicator of the market. Using this model, we can explain the overcapacity phenomenon that appeared time and again in numerous industries. The competitive learning aspect of the situation sheds light on the chronic neglect of due diligence when companies are supposed to conduct demandforecast studies but do not do so.
