EXCESS CAPACITY AND THE PROBABILITY OF ENTRY - AN APPLICATION TO THE US TITANIUM INDUSTRY

Excess capacity has been a characteristic of the metals industries for the past twenty years. This phenomenon may either be inherent to the industries or the result of direct actions taken by firms operating wi thin oligopolistic industries. The purpose of this paper is to constru ct and empirically test a model designed to determine the impact, if a ny, of expected excess capacity on the probability of firm entry into the US titanium metal industry. Using vector autoregressive estimation techniques along with legit models, results are generated which indic ate that expected levels of excess capacity served as an effective bar rier to entry.