This thesis addresses a problem at the nexus of operations, strategy, and economics: in concentrated markets, on the one hand firms may need to expand capacity in order to improve their competitive position, and on the other they also seek to avoid industry excess capacity causing poor industry conditions to destroy the intended value creation. These considerations are opposite to each other. Too much capacity leads to underutilized resources and drives costs up. In contrast, too little capacity will limit the operation's capability to serve customers and earn revenues. The literature of the operations management and operations research fields on capacity expansion is concerned with normative perspectives to invoke optimization techniques. In this stream of research, competitive capacity expansion is not extensive. Operations related studies often ignore the effect of oligopolistic competition on investment activities but explicitly model practical operational environments. Conversely, the literature of the industrial organization and business strategy fields on strategic investment focuses on quantity/pricing competition in oligopoly markets, and is concerned with descriptive perspectives to invoke game-theoretic modeling, emphasizing the effect of imperfect competition. There is an extensive literature of economics on a subject of capacity investment in oligopolistic competition environments. However, economics-related studies do not often address the detailed operational environments. The thesis focuses on the following five complicated factors affecting the union of operations, strategy, and economics: existing capacity, economies of scale, realistic production strategy, strategic interaction, and demand uncertainty. We make two main contributions. First, we extend the current game-theoretic models of strategic capacity investment by explicitly considering existing capacity, scale economies, and realistic production rules, which are often considered in the operations literature. Under reasonable conditions, we are able to solve the proposed models in closed form. Our second contribution is to use the type of generic strategy as firms' decision variable rather than quantity, price, or timing, which is often used in oligopoly theory. After analyzing equilibrium behaviors in the proposed models, our findings are supported by many empirical observations.