R&D Cooperation in Real Option Game Analysis
AbstractCooperative investments in R&D are a significant driving force of the modern economy. As it well-known, the R&D investments are uncertain and the strategic alliances create synergies and additional information that increase the success probabilities about R&D projects. The theory of real option games takes into account both the flexibility value of an investment opportunity and the strategic considerations. In particular way, while the non-cooperative options are exercised in the interest of the option holders' payoffs, the cooperative ones are exercised in order to maximize the total partnership value. In our model we develop an interaction between two firms that invest in R&D and we show the effects of cooperative synergies on several equilibriums. Moreover, we consider that the R&D investments are characterized by positive network externalities that induce more benefits in case of reciprocal R&D success.
Download InfoIf 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.
Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia in its series Quaderni DSEMS with number 19-2008.
Length: 29 pages
Date of creation: Oct 2008
Date of revision:
Real Exchange Options; Cooperation games; Information Revelation; R&D investments.;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
- NEP-GTH-2009-02-22 (Game Theory)
- NEP-INO-2009-02-22 (Innovation)
- NEP-IPR-2009-02-22 (Intellectual Property Rights)
- NEP-MIC-2009-02-22 (Microeconomics)
- NEP-PPM-2009-02-22 (Project, Program & Portfolio Management)
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.:
- Saman Majd & Robert S. Pindyck, 1987.
"Time to Build, Option Value, and Investment Decisions,"
NBER Working Papers
1654, National Bureau of Economic Research, Inc.
- Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
- Armada, Manuel Rocha & Kryzanowski, Lawrence & Pereira, Paulo Jorge, 2007. "A modified finite-lived American exchange option methodology applied to real options valuation," Global Finance Journal, Elsevier, vol. 17(3), pages 419-438, March.
- Mark Shackleton & Rafal Wojakowski, 2002. "The Expected Return and Exercise Time of Merton-style Real Options," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3&4), pages 541-555.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luca Grilli).
If references are entirely missing, you can add them using this form.