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On the welfare and policy implications of a two-period real option game

Author

Listed:
  • Wang, Congcong
  • Chen, Shanshan
  • Wang, Yuhan
  • Pansera, Bruno Antonio
  • Luckraz, Shravan

Abstract

We consider investment decisions in a discrete time, two-stage real option game where firms move sequentially, in the context of a Public-Private Partnership (PPP) problem. The value of the option depends on the market structure which we assume to be either a monopoly or a Bertrand differentiated duopoly. We show that, in an equilibrium where no firm invests in the first period, a government intervention, in form of a subsidy, can improve the welfare level.

Suggested Citation

  • Wang, Congcong & Chen, Shanshan & Wang, Yuhan & Pansera, Bruno Antonio & Luckraz, Shravan, 2023. "On the welfare and policy implications of a two-period real option game," Socio-Economic Planning Sciences, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:soceps:v:90:y:2023:i:c:s003801212300229x
    DOI: 10.1016/j.seps.2023.101717
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