Advanced Search
MyIDEAS: Login to save this paper or follow this series

Irreversible Investment and Learning Expternalities

Contents:

Author Info

  • Decamps, J.-P.
  • Mariotti, T.

Abstract

In this paper, we develop a continuous time duopoly model of irreversible investment under uncertainty, where each player may learn about the profitability of an investment by observing the experience of his rival, as well as some costless background information. We show that the resulting war of attrition game has a unique, symmetric perfect Bayesian equilibrium. We determine the impact of changes in the cost distribution and the stochastic environment on the timing of investment. Last, we study how the equilibrium is affected by the introduction of a first-mover advantage.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Toulouse - GREMAQ in its series Papers with number 00-534.

as in new window
Length: 56 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:gremaq:00-534

Contact details of provider:
Postal: GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.
Phone: 05.61.62.85.56
Fax: 05 61 22 55 63
Email:
Web page: http://www-gremaq.univ-tlse1.fr/
More information through EDIRC

Related research

Keywords: INFORMATION ; INVESTMENTS ; GAMES;

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. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  2. Fudenberg, Drew & Tirole, Jean, 1986. "A Theory of Exit in Duopoly," Econometrica, Econometric Society, vol. 54(4), pages 943-60, July.
  3. Dutta, P.K. & Rustichini, A., 1991. "A Theory of Stopping Time Games with Applications to Product Innovations and Asset Sales," Discussion Papers 1991_35, Columbia University, Department of Economics.
  4. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  5. Rady, Sven & Keller, Godfrey, 2010. "Strategic experimentation with Poisson bandits," Theoretical Economics, Econometric Society, vol. 5(2), May.
  6. Rob, Rafael, 1991. "Learning and Capacity Expansion under Demand Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 655-75, July.
  7. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September.
  8. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December.
  9. Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
  10. Arrow, Kenneth J & Fisher, Anthony C, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 312-19, May.
  11. 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.
  12. Maskin, Eric & Riley, John, 2000. "Equilibrium in Sealed High Bid Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 439-54, July.
  13. Marcel Boyer & Pierre Lasserre & Thomas Mariotti & Michel Moreaux, 2000. "Preemption and Rent Dissipation with Multiple Investments," CIRANO Working Papers 2000s-06, CIRANO.
  14. Kenneth Hendricks & Dan Kovenock, 1989. "Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 164-182, Summer.
  15. Caplin, Andrew & Leahy, John V, 1993. "Sectoral Shocks, Learning, and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 777-94, October.
  16. Bart Lambrecht & William Perraudin, 1996. "Real Options and Preemption," Archive Working Papers 026, Birkbeck, Department of Economics, Mathematics & Statistics.
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. Pawlina, G. & Kort, P.M., 2001. "Strategic Capital Budgeting: Asset Replacement Under Uncertainty," Discussion Paper 2001-4, Tilburg University, Center for Economic Research.
  2. Thijssen, J.J.J., 2003. "Investment Under Uncertainty, Market Evolution and Coalition Spillovers in a Game Theoretic Perspective," Open Access publications from Tilburg University urn:nbn:nl:ui:12-111840, Tilburg University.
  3. Marcel Boyer & Pierre Lasserre & Thomas Mariotti & Michel Moreaux, 2001. "Real Options, Preemption, and the Dynamics of Industry Investments," Cahiers de recherche du Département des sciences économiques, UQAM 20-10, Université du Québec à Montréal, Département des sciences économiques.
  4. Pawlina, G. & Kort, P.M., 2001. "Real Options in an Aymmetric Duopoly: Who Benefits from your Competitive Disadvantage," Discussion Paper 2001-95, Tilburg University, Center for Economic Research.

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:fth:gremaq:00-534. 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: (Thomas Krichel).

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.