This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Strategic investment under uncertainty: merging real options with game theory

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Kort, P.M.
Huisman, K.J.M.
Pawlina, G.
Thijssen, J.J. (Tilburg University, Center for Economic Research)

Additional information is available for the following registered author(s):

Abstract

As becomes apparent from the standard text books in industrial organization (cf. Tirole, 1988, The Theory of Industrial Organization), the analysis of the e.ects of uncertainty within this field is yet underdeveloped. This paper shows that the new theory of strategic real options can be used to fill this empty hole . Based on the work by Smets (1991) standard models are identified, and they are analyzed by applying a method involving symmetric mixed strategies. As an illustration, extensions regarding asymmetry, technology adoption and decreasing uncertainty over time are reviewed. Among others, it is found that the value of a high cost firm can increase in its own cost. Furthermore, it is established to what extent investments are delayed when technologial progress is anticipated, and it is found that competition can be bad for welfare.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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://arno.uvt.nl/show.cgi?fid=4424
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 6.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2003
Date of revision:
Handle: RePEc:dgr:kubcen:20036

Contact details of provider:
Web page: http://center.uvt.nl

For technical questions regarding this item, or to correct its listing, contact: (Corry Stuyts).

Related research
Keywords:

Other versions of this item:

This paper has been announced in the following NEP Reports: 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.:
  1. Grenadier, Steven R, 1996. " The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, vol. 51(5), pages 1653-79, December. [Downloadable!] (restricted)
  2. Huisman, Kuno J. M. & Kort, Peter M., 2003. "Strategic investment in technological innovations," European Journal of Operational Research, Elsevier, vol. 144(1), pages 209-223, January. [Downloadable!] (restricted)
    Other versions:
  3. Thijssen, Jacco J. J. & Huisman, Kuno J. M. & Kort, Peter M., 2004. "The effect of information streams on capital budgeting decisions," European Journal of Operational Research, Elsevier, vol. 157(3), pages 759-774, September. [Downloadable!] (restricted)
  4. Mason, Robin & Helen Weeds, 2003. "The Failing Firm Defence: Merger Policy and Entry," Royal Economic Society Annual Conference 2003 148, Royal Economic Society. [Downloadable!]
    Other versions:
  5. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Blackwell Publishing, vol. 52(3), pages 383-401, July. [Downloadable!] (restricted)
  6. Pawlina, G. & Kort, P.M., 2001. "Real options in an asymmetric duopoly: : who benefits from your competitive disadvantage," Discussion Paper 95, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  7. Enrico Pennings, 2004. "Optimal Pricing And Quality Choice When Investment In Quality Is Irreversible," Journal of Industrial Economics, Blackwell Publishing, vol. 52(4), pages 569-589, December. [Downloadable!] (restricted)
    Other versions:
  8. Huisman, K.J.M. & Kort, P.M., 2000. "Strategic technology adoption taking into account future technological improvements : a real options approach," Discussion Paper 52, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  9. Weeds, Helen, 2002. "Strategic Delay in a Real Options Model of R&D Competition," Review of Economic Studies, Blackwell Publishing, vol. 69(3), pages 729-47, July.
    Other versions:
  10. Thijssen, J.J.J. & Huisman, K.J.M. & Kort, P.M., 2002. "Symmetric equilibrium strategies in game theoretical real option models," Discussion Paper 81, Tilburg University, Center for Economic Research. [Downloadable!]
  11. Lambrecht, Bart M, 2001. "The Impact of Debt Financing on Entry and Exit in a Duopoly," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 14(3), pages 765-804.
  12. Nielsen, Martin J., 2002. "Competition and irreversible investments," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 731-743, May. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  14. Pawlina, G. & Kort, P.M., 2001. "Strategic capital budgeting : asset replacement under uncertainty," Discussion Paper 4, Tilburg University, Center for Economic Research. [Downloadable!]
  15. Mason, Robin & Weeds, Helen, 2001. "Irreversible Investment with Strategic Interactions," CEPR Discussion Papers 3013, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. YongQiang Chu & Tien Sing, 2007. "Optimal Timing of Real Estate Investment under an Asymmetric Duopoly," The Journal of Real Estate Finance and Economics, Springer, vol. 34(3), pages 327-345, April. [Downloadable!] (restricted)
  2. Heikkinen, Tiina & Pietola, Kyosti, 2006. "Investment and the Dynamic Cost of Income Uncertainty: the Case of Diminishing Expectations in Agriculture," Discussion Papers 11868, MTT Agrifood Research Finland. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
  4. Bouis, Romain & Huisman, K.J.M. & Kort, Peter M., 2006. "Investment in oligopoly under uncertainty : the accordion effect," Discussion Paper 69, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  5. Pietola, Kyosti & Myyra, Sami & Pouta, Eija, 2009. "Fiscal and trade distorting effects of capital gains tax on land sales - empirical evidence from agricultural land market in Finland," Discussion Papers 50040, MTT Agrifood Research Finland. [Downloadable!]
Statistics
Access and download statistics

Did you know? There is a FAQ (frequently asked questions).

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.