The strategic capacity-expansion model for a newsprint firm

It is pointed out that capacity expansion decisions in a capital-intensive industry determine to a large extent the fate of a firm, especially in an oligopolistic industry facing cyclical commodity markets where all firms endure the consequences of mistaken decisions, not only their own but also those of others. A model for helping firms with their capacity and production decisions in the newsprint industry in North America is presented. The model explicitly considers strategic interactions between firms in the industry, both in making short-term production decisions and in deciding on the expansion of capacity. The Nash equilibrium-solution concept is used to identify actions to be taken by the competing firms. Results validating the model are presented and an example of its use for strategic experiments is provided