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Strategic Delay in a Real Optimna Model of R&D Competition Author info | Abstract | Publisher info | Download info | Related research | Statistics Weeds, H.
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This paper considers irreversible investment in competing research projects with uncertain returns under a winner-takes-all patent system. Uncertainty takes two distinct forms: the technological success of the project is probabilistic, while the economic value of the patent to be won evolves stochastically over time. According to the theory of real options uncertainty generates an option value of delay, but with two competing firms the fear of preemption would appear to undermine this approach. In non-cooperative equilibrium two patterns of investment emerge depending on parameter values.
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number
576.
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Length: 39 pages
Date of creation: 2000Date of revision:
Handle: RePEc:wrk:warwec:576Contact details of provider: Postal: CV4 7AL COVENTRY Phone: +44 (0) 2476 523202 Fax: +44 (0) 2476 523032 Web page: http://www2.warwick.ac.uk/fac/soc/economics/ More information through EDIRC
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Keywords: INVESTMENTS ; RESEARCH AND DEVELOPMENT ; COMPETITION ; Other versions of this item:
Find related papers by JEL classification: C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
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.:
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Other versions: repec:fth:coluec:549 is not listed on IDEAS
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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.)
Martzoukos, Spiros H & Zacharias, Eleftherios, 2008.
"Real Option Games with R&D and Learning Spillovers ,"
MPRA Paper
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Toole, Andrew A. & Czarnitzki, Dirk, 2008.
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ZEW Discussion Papers
08-013, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Robin Mason & Helen Weeds, 2000.
"Networks, Options and Preemption ,"
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[Downloadable!]
Other versions:
Mason, R. & Weeds, H., 2000.
"Networks, Options and Preemptions ,"
Discussion Paper Series In Economics And Econometrics
0013, Economics Division, School of Social Sciences, University of Southampton.
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The Warwick Economics Research Paper Series (TWERPS)
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[Downloadable!] J.J.J. Thijssen & K.J.M. Huisman & P.M. Kort, 2003.
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Other versions: Giovanni Villani, 2008.
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Marco, Alan, 2001.
"The Option Value of Patent Litigation: Theory and Evidence ,"
Vassar College Department of Economics Working Paper Series
52, Vassar College Department of Economics, revised Dec 2003.
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"Real Options, Preemption, and the Dynamics of Industry Investments ,"
Cahiers de recherche du Département des sciences économiques, UQAM
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"Invention under uncertainty and the threat of ex post entry ,"
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"Ramsey Waits: A Theory of Non-Exclusive Real Options with First-Mover Advantages ,"
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07/17, Department of Economics, University of York.
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BOBTCHEFF Catherine, 2008.
"Real Options and Technology Choice under Bertrand Competition ,"
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08.16.260, LERNA, University of Toulouse.
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Adriana Breccia & Hector Salgado-Banda, 2005.
"Competing or Colluding in a Stochastic Framework ,"
Birkbeck Working Papers in Economics and Finance
0504, Birkbeck, Department of Economics, Mathematics & Statistics.
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Thomas Sparla, 2000.
"Closure Options in Duopoly: The Case of Second-Mover Advantages ,"
Discussion Papers in Economics
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Lint, O., 2000.
"Retrospective insights from real options in R&D ,"
ECIS Working Papers
00.09, Eindhoven Centre for Innovation Studies, Eindhoven University of Technology.
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Marcel Boyer & Pierre Lasserre & Michel Moreaux, 2007.
"The Dynamics of Industry Investments ,"
CIRANO Working Papers
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Flavia Cortelezzi & Giovanni Villani, 2007.
"Strategic Technology Adoption and Market Dynamics as Option Games ,"
Quaderni DSEMS
14-2007, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
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Huisman, K.J.M. & Kort, P.M., 1999.
"Effects of strategic interactions on the option value of waiting ,"
Discussion Paper
92, Tilburg University, Center for Economic Research.
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Murat F. Iyigun & X. Maggie Chen, 2004.
"Strategic R&D Delays Generate Market Power ,"
Econometric Society 2004 North American Summer Meetings
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Ulrich Pape & Stephan Schmidt-Tank, 2005.
"Valuing Joint Ventures Using Real Options ,"
Finance
0503030, EconWPA.
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Adriana Breccia & Hector Salgado-Banda, 2006.
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Computing in Economics and Finance 2006
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Mason, Robin & Weeds, Helen, 2002.
"The Failing Firm Defence: Merger Policy and Entry ,"
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3664, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
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"Symmetric equilibrium strategies in game theoretical real option models ,"
Discussion Paper
81, Tilburg University, Center for Economic Research.
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Kort, P.M. & Huisman, K.J.M. & Pawlina, G. & Thijssen, J.J., 2003.
"Strategic investment under uncertainty: merging real options with game theory ,"
Discussion Paper
6, Tilburg University, Center for Economic Research.
[Downloadable!]
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