Irreversible investment in oligopoly
We offer a new perspective on games of irreversible investment under uncertainty in continuous time. The basis is a particular approach to solve the involved stochastic optimal control problems which allows to establish existence and uniqueness of an oligopolistic open loop equilibrium in a very general framework without reliance on any Markovian property. It simultaneously induces quite natural economic interpretation and predictions by its characterization of optimal strategies through first order conditions. The construction of equilibrium policies is then enabled by a stochastic representation theorem. A stepwise specification of the general model leads to further economic conclusions. We obtain explicit solutions for LÃ©vy processes.
(This abstract was borrowed from another version of this item.)
Volume (Year): 16 (2012)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/mathematics/quantitative+finance/journal/780/PS2|
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.:
- Xia Su & Frank Riedel, 2006.
"On Irreversible Investment,"
Bonn Econ Discussion Papers
bgse13_2006, University of Bonn, Germany.
- Pindyck, Robert S., 1986.
"Irreversible investment, capacity choice, and the value of the firm,"
1802-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
- Robert S. Pindyck, 1986. "Irreversible Investment, Capacity Choice, and the Value of the Firm," NBER Working Papers 1980, National Bureau of Economic Research, Inc.
- Ioannis Karatzas & Fridrik M. Baldursson, 1996. "Irreversible investment and industry equilibrium (*)," Finance and Stochastics, Springer, vol. 1(1), pages 69-89.
- Novshek, William., 1984.
"On the Existence of Cournot Equilibrium,"
517, California Institute of Technology, Division of the Humanities and Social Sciences.
- A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
- Bertola, Giuseppe, 1998. "Irreversible investment," Research in Economics, Elsevier, vol. 52(1), pages 3-37, March.
- Bank, Peter & Riedel, Frank, 1999.
"Optimal consumption choice under uncertainty with intertemporal substitution,"
SFB 373 Discussion Papers
1999,71, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Peter Bank & Frank Riedel, 1999. "Optimal Consumption Choice under Uncertainty with Intertemporal Substitution," GE, Growth, Math methods 9908002, EconWPA.
- 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.
- 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.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, September.
When requesting a correction, please mention this item's handle: RePEc:spr:finsto:v:16:y:2012:i:2:p:207-224. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.