Advanced Search
MyIDEAS: Login to save this article or follow this journal

Investment in oligopoly under uncertainty: The accordion effect

Contents:

Author Info

  • Bouis, Romain
  • Huisman, Kuno J.M.
  • Kort, Peter M.

Abstract

This paper studies investments in new markets where more than two (anticipated) identical competitors are present. In case of three firms an accordion effect is detected: an exogenous demand shock results in a change of the wedge between investment thresholds of the first and second investor that is qualitatively different from the change of the wedge between the second and third investment threshold. Furthermore, it turns out that in the three-firm case the investment timing of the first investor lies in between the one and the two-firm case. These results are numerically extended to the n-firm case.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V8P-4TPPDVF-1/2/87f55dcf86fa90ab63ff2a5ca576ab95
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 2 (March)
Pages: 320-331

as in new window
Handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:320-331

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Investment under uncertainty Real Options Competition;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bouis, Romain & Huisman, Kuno & Kort, Peter M., 2009. "Investment in oligopoly under uncertainty: The accordion effect," Economics Papers from University Paris Dauphine 123456789/12655, Paris Dauphine University.
  2. Steven R. Grenadier, 2000. "Option Exercise Games: The Intersection Of Real Options And Game Theory," Journal of Applied Corporate Finance, Morgan Stanley, vol. 13(2), pages 99-107.
  3. Huisman, K.J.M., 2000. "Technology Investment: A Game Theoretic Real Options Approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-84087, Tilburg University.
  4. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  5. Leahy, John V, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(4), pages 1105-33, November.
  6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  7. Sarkar, Sudipto, 2000. "On the investment-uncertainty relationship in a real options model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 219-225, February.
  8. Thijssen, J.J.J. & Huisman, K.J.M. & Kort, P.M., 2002. "Symmetric Equilibrium Strategies in Game Theoretical Real Option Models," Discussion Paper, Tilburg University, Center for Economic Research 2002-81, Tilburg University, Center for Economic Research.
  9. Pawlina, G. & Kort, P.M., 2001. "Real Options in an Aymmetric Duopoly: Who Benefits from your Competitive Disadvantage," Discussion Paper, Tilburg University, Center for Economic Research 2001-95, Tilburg University, Center for Economic Research.
  10. Huisman, K.J.M. & Kort, P.M. & Pawlina, G. & Thijssen, J.J.J., 2004. "Strategic investment under uncertainty: Merging real options with game theory," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142400, Tilburg University.
  11. Baldursson, Fridrik M., 1998. "Irreversible investment under uncertainty in oligopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 22(4), pages 627-644, April.
  12. 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.
  13. Nielsen, Martin J., 2002. "Competition and irreversible investments," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(5), pages 731-743, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bouis, R. & Huisman, K.J.M. & Kort, P.M., 2006. "Investment in Oligopoly under Uncertainty: The Accordion Effect," Discussion Paper, Tilburg University, Center for Economic Research 2006-69, Tilburg University, Center for Economic Research.
  2. Femminis, Gianluca & Martini, Gianmaria, 2011. "Irreversible investment and R&D spillovers in a dynamic duopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 35(7), pages 1061-1090, July.
  3. Makoto Goto & Katsumasa Nishide & Ryuta Takashima, 2013. "Irreversible Investment under Competition with a Markov Switching Regime," KIER Working Papers 861, Kyoto University, Institute of Economic Research.
  4. Argenziano, Rossella & Schmidt-Dengler, Philipp, 2012. "Inefficient entry order in preemption games," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 445-460.
  5. Park, Andreas & Smith, Lones, 2008. "Caller Number Five and related timing games," Theoretical Economics, Econometric Society, Econometric Society, vol. 3(2), June.
  6. Pereira, Paulo J. & Armada, Manuel Rocha, 2013. "Investment decisions under hidden competition," Economics Letters, Elsevier, vol. 121(2), pages 228-231.
  7. Gianluca Femminis, 2012. "Risk aversion heterogeneity and the investment-uncertainty relationship," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq1260, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  8. Chronopoulos, Michail & De Reyck, Bert & Siddiqui, Afzal, 2014. "Duopolistic competition under risk aversion and uncertainty," European Journal of Operational Research, Elsevier, vol. 236(2), pages 643-656.
  9. Eric Rasmusen & Young-Ro Yoon, 2008. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2008-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  10. Azevedo, Alcino & Paxson, Dean, 2014. "Developing real option game models," European Journal of Operational Research, Elsevier, vol. 237(3), pages 909-920.
  11. Doriana Ruffino & Jonathan Treussard, 2006. "Lumps and Clusters in Duopolistic Investment Games: An Early Exercise Premium Approach," Boston University - Department of Economics - Working Papers Series WP2006-044, Boston University - Department of Economics.
  12. Rossella Argenziano & Philipp Schmidt-Dengler, 2014. "Clustering In N-Player Preemption Games," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 368-396, 04.
  13. Gianluca Femminis & Gianmaria Martini, 2008. "Irreversible R&D investment with inter-firm spillovers," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi compila la segreteria, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  14. Katsumasa Nishide & Kyoko Yagi, 2013. "Competition and the Bad News Principle in a Real Options Framework," KIER Working Papers 860, Kyoto University, Institute of Economic Research.
  15. Siddiqui, Afzal & Takashima, Ryuta, 2012. "Capacity switching options under rivalry and uncertainty," European Journal of Operational Research, Elsevier, vol. 222(3), pages 583-595.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:27:y:2009:i:2:p:320-331. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.