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Symmetric equilibrium strategies in game theoretic real option models

Listed author(s):
  • Thijssen, Jacco J.J.
  • Huisman, Kuno J.M.
  • Kort, Peter M.

This paper considers the problem of investment timing under uncertainty in a duopoly framework. When both firms want to be the first investor a coordination problem arises. Here, a method is proposed to deal with this coordination problem, involving the use of symmetric mixed strategies.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304406812000389
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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 4 ()
Pages: 219-225

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Handle: RePEc:eee:mateco:v:48:y:2012:i:4:p:219-225
DOI: 10.1016/j.jmateco.2012.05.004
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, July.
  2. 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.
  3. Jacco Thijssen, 2010. "Irreversible investment and discounting: an arbitrage pricing approach," Annals of Finance, Springer, vol. 6(3), pages 295-315, July.
  4. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, 09-2014.
  5. Luis Alvarez & Teppo Rakkolainen, 2010. "Investment timing in presence of downside risk: a certainty equivalent characterization," Annals of Finance, Springer, vol. 6(3), pages 317-333, July.
  6. Kerry Back & Dirk Paulsen, 2009. "Open-Loop Equilibria and Perfect Competition in Option Exercise Games," Review of Financial Studies, Society for Financial Studies, vol. 22(11), pages 4531-4552, November.
  7. Thijssen, J.J.J. & Huisman, K.J.M. & Kort, P.M., 2001. "Strategic Investment Under Uncertainty and Information Spillovers," Discussion Paper 2001-91, Tilburg University, Center for Economic Research.
  8. Jan-Henrik Steg, 2012. "Irreversible investment in oligopoly," Finance and Stochastics, Springer, vol. 16(2), pages 207-224, April.
  9. Grzegorz Pawlina & Peter M. Kort, 2010. "Strategic Quality Choice Under Uncertainty: A Real Options Approach," Manchester School, University of Manchester, vol. 78(1), pages 1-19, 01.
  10. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 383-401.
  11. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
  12. Grzegorz Pawlina & Peter M. Kort, 2006. "Real Options in an Asymmetric Duopoly: Who Benefits from Your Competitive Disadvantage?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 1-35, 03.
  13. Dutta, Prajit K & Lach, Saul & Rustichini, Aldo, 1995. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 563-589, Winter.
  14. Helen Weeds, 2002. "Strategic Delay in a Real Options Model of R&D Competition," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 729-747.
  15. Thijssen, J.J.J. & van Damme, E.E.C. & Huisman, K.J.M. & Kort, P.M., 2001. "Investment Under Vanishing Uncertainty Due to Information Arriving Over Time," Discussion Paper 2001-14, Tilburg University, Center for Economic Research.
  16. Huisman, K.J.M. & Kort, P.M., 1999. "Effects of Strategic Interactions on the Option Value of Waiting," Discussion Paper 1999-92, Tilburg University, Center for Economic Research.
  17. repec:fth:tilbur:9992 is not listed on IDEAS
  18. Leo K. Simon., 1987. "A Multistage Duel in Continuous Time," Economics Working Papers 8757, University of California at Berkeley.
  19. Hendricks, Ken & Weiss, Andrew & Wilson, Charles A, 1988. "The War of Attrition in Continuous Time with Complete Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(4), pages 663-680, November.
  20. Thijssen, Jacco J.J., 2010. "Preemption in a real option game with a first mover advantage and player-specific uncertainty," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2448-2462, November.
  21. Grenadier, Steven R, 1996. " The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, vol. 51(5), pages 1653-1679, December.
  22. Boyer, Marcel & Lasserre, Pierre & Mariotti, Thomas & Moreaux, Michel, 2004. "Preemption and rent dissipation under price competition," International Journal of Industrial Organization, Elsevier, vol. 22(3), pages 309-328, March.
  23. Mason, Robin & Weeds, Helen, 2010. "Investment, uncertainty and pre-emption," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 278-287, May.
  24. Baldursson, Fridrik M., 1998. "Irreversible investment under uncertainty in oligopoly," Journal of Economic Dynamics and Control, Elsevier, vol. 22(4), pages 627-644, April.
  25. 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.
  26. Nielsen, Martin J., 2002. "Competition and irreversible investments," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 731-743, May.
  27. Simon, Leo K., 1987. "A Multistage Duel in Continuous Time," Department of Economics, Working Paper Series qt7186g3c4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  28. John V. Leahy, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 1105-1133.
  29. Boyarchenko, Svetlana & Levendorskii, Sergei, 2010. "Optimal stopping in Levy models, for non-monotone discontinuous payoffs," MPRA Paper 27999, University Library of Munich, Germany.
  30. Dutta Prajit K. & Rustichini Aldo, 1995. "(s, S) Equilibria in Stochastic Games," Journal of Economic Theory, Elsevier, vol. 67(1), pages 1-39, October.
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