IDEAS home Printed from https://ideas.repec.org/a/ids/ijcome/v10y2020i1p92-110.html
   My bibliography  Save this article

Real options games between two competitors: the case of price war

Author

Listed:
  • Elżbieta RychÅ‚owska-MusiaÅ‚

Abstract

This paper takes the subject of optimal investment strategies for firms acting on a competitive market. An investment decision-making process is described as a game between two players, and the real options approach is used to find a value of an investment project, therefore the paper falls in the area of the real options games. Based on games solutions we formulate recommendations for competitors. It comes as no surprise that the advantage is primarily on the side of a dominant company, but under certain circumstances, a weaker party has a very strong bargaining chip. To mitigate possible effects of price war, firms may cooperate and their negotiations could be supported by a payoff transfer computed as the coco value. It also turned out that the possible cooperation between competitors gains significance when a project risk is high, as well as when the price war is cut-throat.

Suggested Citation

  • Elżbieta RychÅ‚owska-MusiaÅ‚, 2020. "Real options games between two competitors: the case of price war," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 10(1), pages 92-110.
    • Handle: RePEc:ids:ijcome:v:10:y:2020:i:1:p:92-110
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=104177
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijcome:v:10:y:2020:i:1:p:92-110. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=311 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.