Dynamic Capacity and Technology Competition in Duopoly Environment

There are many uncertain factors in high-tech industries, including of high investment cost, long lead time and competition, etc. Due to prior statement, this paper aims to develop a capacity and technology investment strategy in duopoly environment. For simplicity, we suppose the future demand is deterministic and only one product in the market. Firms try to maximize their profit through production and investment strategy.he main difference from past research is the setting of technology measurement. We focus it on yield rate, which can improve production quantity and operating cost. We build a dynamic programming model and develop the capacity and technology investment strategy under budget constraints between two firms.