Competitive investing equilibrium under a procurement mechanism
This paper proposes a procurement mechanism for a research and development (R&D) project, in which the stochastic nature of R&D is incorporated, and the potential agents needed to invest prior to the agent are selected. The incentive contract aims to attract the investment of potential agents through a sharing rate. By establishing the stopping time game, an optimal investing strategy for potential agents is derived. Furthermore, the investment equilibria are discussed, and the conditions under which the equilibrium represents preemption or simultaneous investment are presented.
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- Guofu Tan, 1996. "Optimal Procurement Mechanisms for an Informed Buyer," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 699-716, August.
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- Leandro Arozamena & Estelle Cantillon, 2004. "Investment incentives in procurement auctions," ULB Institutional Repository 2013/9005, ULB -- Universite Libre de Bruxelles.
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- Bag, Parimal Kanti, 1997. "Optimal auction design and R&D," European Economic Review, Elsevier, vol. 41(9), pages 1655-1674, December.
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- Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
- Yuri Kifer, 2000. "Game options," Finance and Stochastics, Springer, vol. 4(4), pages 443-463.
- Rajeev K. Goel, 1999. "On contracting for uncertain R&D," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 99-106.
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