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A patent race in a real options setting: Investment strategy, valuation, CAPM beta, and return volatility

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  • Meng, Rujing
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    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 32 (2008)
    Issue (Month): 10 (October)
    Pages: 3192-3217

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    Handle: RePEc:eee:dyncon:v:32:y:2008:i:10:p:3192-3217

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    References

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    1. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
    2. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August.
    3. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February.
    4. Lukach, R. & Kort, P.M. & Plasmans, J., 2007. "Optimal R&D investment strategies under the threat of new technology entry," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 103-119, February.
    5. Ricardo J. Caballero & Robert S. Pindyck, 1992. "Uncertainty, Investment, and Industry Evolution," NBER Working Papers 4160, National Bureau of Economic Research, Inc.
    6. Pindyck, Robert S., 1986. "Irreversible investment, capacity choice, and the value of the firm," Working papers 1802-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
    8. Roger Craine., 1988. "Risky Business: The Allocation of Capital," Economics Working Papers 8873, University of California at Berkeley.
    9. Abel, Andrew B, 1985. "A Stochastic Model of Investment, Marginal q and the Market Value of the Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 305-22, June.
    10. Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
    11. Kenneth L. Judd, 1985. "Closed-Loop Equilibrium in a Multi-Stage Innovation Race," Discussion Papers 647, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    12. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
    13. Lambrecht, Bart & Perraudin, William, 2003. "Real options and preemption under incomplete information," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 619-643, February.
    14. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
    15. Harris, Christopher & Vickers, John, 1987. "Racing with Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 1-21, January.
    16. John H. Cochrane, 2001. "The Risk and Return of Venture Capital," NBER Working Papers 8066, National Bureau of Economic Research, Inc.
    17. Craine, Roger, 1988. "Risky business : The allocation of capital," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 135-135, March.
    18. Harris, Christopher & Vickers, John, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 193-209, April.
    19. Craine, Roger, 1988. "Risky Business: The Allocation of Capital," Department of Economics, Working Paper Series qt5f50z40s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    20. Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
    21. Lihui Lin & Nalin Kulatilaka, 2007. "Strategic options and firm value," Managerial Finance, Emerald Group Publishing, vol. 33(11), pages 893-903.
    22. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    23. Nalin Kulatilaka & Enrico C. Perotti, 1998. "Strategic Growth Options," Management Science, INFORMS, vol. 44(8), pages 1021-1031, August.
    24. Grenadier, Steven R, 1999. "Information Revelation through Option Exercise," Review of Financial Studies, Society for Financial Studies, vol. 12(1), pages 95-129.
    25. Abel, Andrew B., 1984. "The effects of uncertainty on investment and the expected long-run capital stock," Journal of Economic Dynamics and Control, Elsevier, vol. 7(1), pages 39-53, February.
    26. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
    27. Robert Novy-Marx, 2007. "An Equilibrium Model of Investment Under Uncertainty," Review of Financial Studies, Society for Financial Studies, vol. 20(5), pages 1461-1502, 2007 29.
    28. Jonathan B. Berk, 2004. "Valuation and Return Dynamics of New Ventures," Review of Financial Studies, Society for Financial Studies, vol. 17(1), pages 1-35.
    29. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
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    Cited by:
    1. Graham, Jeffrey, 2011. "Strategic real options under asymmetric information," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 922-934, June.

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