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Developing real option game models

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  • Azevedo, Alcino
  • Paxson, Dean
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    Abstract

    By mixing concepts from both game theoretic analysis and real options theory, an investment decision in a competitive market can be seen as a “game” between firms, as firms implicitly take into account other firms’ reactions to their own investment actions. We review two decades of real option game models, suggesting which critical problems have been “solved” by considering game theory, and which significant problems have not been yet adequately addressed. We provide some insights on the plausible empirical applications, or shortfalls in applications to date, and suggest some promising avenues for future research.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 237 (2014)
    Issue (Month): 3 ()
    Pages: 909-920

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    Handle: RePEc:eee:ejores:v:237:y:2014:i:3:p:909-920

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    Web page: http://www.elsevier.com/locate/eor

    Related research

    Keywords: Finance; Real option games; Investment analysis; Strategic investment;

    References

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