Search, Project Adoption and the Fear of Commitment
AbstractWe examine project adoption decisions of firms constrained in the number of projects they can handle at once. Adoption requires a commitment for a period of uncertain duration, restricting the firm in subsequent periods. Capacity constraints create a “fear of commitment” — some positive return projects are not adopted. In the sequential move dynamic game, the second mover sometimes adopts projects that were rejected by the first, even when both firms are symmetric and equally informed. We study the e§ects of competition on the fear of commitment, and compare the jointly optimal adoption decision to the behavior of strategic non-cooperative firms.
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Bibliographic InfoPaper provided by Sciences Po Departement of Economics in its series Sciences Po Economics Discussion Papers with number 2013-12.
Date of creation: Jul 2013
Date of revision:
adoption; project selection; commitment; Markov perfect equilibrium;
Find related papers by JEL classification:
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-05 (All new papers)
- NEP-CDM-2013-08-05 (Collective Decision-Making)
- NEP-MIC-2013-08-05 (Microeconomics)
- NEP-PPM-2013-08-05 (Project, Program & Portfolio Management)
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