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Investment under regime uncertainty: Impact of competition and preemption

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  • Nishide, Katsumasa
  • Yagi, Kyoko

Abstract

In this study, we analyze the investment-timing problem and introduce a model of two firms competing for investment preemption, each of which knows in advance the time at which the economic condition that will have an impact on the investment changes. We qualitatively show how two firms strategically optimize their investment timing, taking into account competition and preemption.

Suggested Citation

  • Nishide, Katsumasa & Yagi, Kyoko, 2016. "Investment under regime uncertainty: Impact of competition and preemption," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 47-58.
    • Handle: RePEc:eee:indorg:v:45:y:2016:i:c:p:47-58
    DOI: 10.1016/j.ijindorg.2016.01.001
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    References listed on IDEAS

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    Cited by:

    1. Stefano Barbieri & Kai A. Konrad & David A. Malueg, 2020. "Preemption contests between groups," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 934-961, September.
    2. Goto, Makoto & Nishide, Katsumasa & Takashima, Ryuta, 2017. "Leaders, followers, and equity risk premiums in booms and busts," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 207-220.

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    More about this item

    Keywords

    Investment timing; Competition; Preemption; Real options;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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