Excess Capacity

Deterrence and Strategic Thinking

Excess Capacity Deterrence Strategic Thinking

Problem it solves

unclear strategic direction

Best for

Situations where deterrence and strategic thinking are crucial

Not ideal for

Situations where parties are not strategic

Overview

Why this framework exists

Excess Capacity is a framework for understanding the strategic thinking involved in deterrence and excess capacity. The framework involves an established firm that installs excess capacity to deter new competitors from entering the market.

Core principles

3 total

The established firm should install excess capacity to deter new competitors.
The excess capacity should be designed to make it more difficult for new competitors to enter the market.
The excess capacity should be used to deter new competitors, rather than to produce more output.

Steps

2 steps

Design the Excess Capacity
Design an excess capacity system that deters new competitors from entering the market.
Pro tipEnsure that the excess capacity is fair and unbiased.
WarningAvoid using excess capacity that is too complex or difficult to understand.
Implement the Excess Capacity
Implement the excess capacity system, ensuring that it is used to deter new competitors.
Pro tipEnsure that all parties understand the rules and consequences of the excess capacity system.
WarningAvoid interrupting or influencing the excess capacity system in any way.

Checklist

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Clearly define the excess capacity system and its rules.
Ensure all parties understand the rules and consequences of the excess capacity system.
Play the excess capacity system without interruption or influence.
Consider the potential consequences of strategic thinking and deterrence.