The timing of capacity expansion investments in oligopoly under demand uncertainty

Since a flexibility value emerges in waiting to expand capacity, the impact of demand uncertainty in an oligopolistic industry leads to capacity expansion timing. The creation of growth opportunities is then the outcome of expanding capacity at optimal times. However, in our model different capacity size competitors interact not affecting each others, because assessing the impact of demand uncertainty on capacity expansion projects takes them to set up independently their optimal capacity expansion timing schedules. In equilibrium no firm expands capacity more often than any other. Under demand uncertainty simultaneity in capacity expansions is the only possible Markov Perfect Equilibrium