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Project selection: Commitment and competition

Author

Listed:
  • Vidya Atal
  • Talia Bar

    (UCONN - University of Connecticut [Storrs])

  • Sidartha Gordon

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

Abstract

We examine project selection decisions of firms constrained in the number of projects they can handle at once. A new project opportunity arises every period. Taking on a project requires a commitment of uncertain duration, preventing the firm from selecting another project in subsequent periods until the commitment ends. In our dynamic game, when two firms are free of commitment, they move sequentially in random order. Symmetric pure strategy Markov perfect equilibria always exist. In equilibrium, the first mover strategically rejects some projects that are then selected by the second mover, even when the value of the project is the same for both firms. A monopolist rejects more projects, and adopts ones of higher average quality compared to the duopolist. Duopolists select too few projects compared to their jointly optimal behavior. We extend the model to allow for externalities, asymmetry, and n>2n>2 firms.

Suggested Citation

  • Vidya Atal & Talia Bar & Sidartha Gordon, 2016. "Project selection: Commitment and competition," Post-Print hal-01408902, HAL.
    • Handle: RePEc:hal:journl:hal-01408902
    DOI: 10.1016/j.geb.2016.01.011
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    Cited by:

    1. Philippe Bich & Rida Laraki, 2014. "On the Existence of Approximate Equilibria and Sharing Rule Solutions in Discontinuous Games," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01071678, HAL.
    2. Khalifa Mohammed Al-Sobai & Shaligram Pokharel & Galal M. Abdella, 2020. "Perspectives on the Capabilities for the Selection of Strategic Projects," Sustainability, MDPI, vol. 12(19), pages 1-20, October.
    3. Philippe Bich & Rida Laraki, 2014. "On the Existence of Approximate Equilibria and Sharing Rule Solutions in Discontinuous Games," Working Papers hal-01071678, HAL.

    More about this item

    Keywords

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    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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