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Coordination and Cooperation in Investment Timing with Externalities ?

  • Etienne Billette De Villemeur

    (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université des Sciences et Technologies de Lille - Lille I)

  • Richard Ruble

    (EMLYON RECHERCHE - EMLYON Business School, GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)

  • Bruno Versaevel

    ()

    (EMLYON RECHERCHE - EMLYON Business School, GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)

We characterize sequential (preemption) and simultaneous (coordination) equilibria, as well as joint-value maximizing (cooperation) solutions, in a model of investment timing allowing for externalities in both flow pro...ts and investment costs. For two ex-ante symmetric ...rms, either preemption or attrition occur depending on the size of the investment externality. Coordination is less likely with more discounting, as in a repeated game, and more likely with higher growth and volatility. Optimal cooperation involves either monopoly or duopoly investment, the latter being either symmetric or asymmetric. Finally, these characterizations are validated by applications to standard speci...cations of capacity accumulation and of R&D investment. In the former setup, coordination is likelier if installed capacities and lumpy investments are both large. With R&D input choices, if investment synergies are large, coordination and cooperation result in the same outcomes.

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Paper provided by HAL in its series Post-Print with number halshs-00639471.

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Date of creation: 2011
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Handle: RePEc:hal:journl:halshs-00639471
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  1. Jacco Thijssen & Kuno Huisman & Peter Kort, 2006. "The effects of information on strategic investment and welfare," Economic Theory, Springer, vol. 28(2), pages 399-424, 06.
  2. Désiré Vencatachellum & Bruno Versaevel, 2006. "R&D Delegation in a Duopoly with Spillovers," Post-Print halshs-00142520, HAL.
  3. Thijssen, J.J.J. & Huisman, K.J.M. & Kort, P.M., 2002. "Symmetric Equilibrium Strategies in Game Theoretical Real Option Models," Discussion Paper 2002-81, Tilburg University, Center for Economic Research.
  4. repec:dgr:kubcen:199992 is not listed on IDEAS
  5. Leahy, Dermot & Neary, J Peter, 2004. "Symmetrical Research Joint Ventures: Cooperative Substitutes and Complements," CEPR Discussion Papers 4497, C.E.P.R. Discussion Papers.
  6. Hoppe, Heidrun C., 2000. "Second-mover advantages in the strategic adoption of new technology under uncertainty," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 315-338, February.
  7. Grenadier, Steven R. & Wang, Neng, 2005. "Investment timing, agency, and information," Journal of Financial Economics, Elsevier, vol. 75(3), pages 493-533, March.
  8. repec:ner:tilbur:urn:nbn:nl:ui:12-84087 is not listed on IDEAS
  9. Boyer, Marcel & Lasserre, Pierre & Moreaux, Michel, 2012. "A dynamic duopoly investment game without commitment under uncertain market expansion," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 663-681.
  10. Mason, Robin & Weeds, Helen, 2010. "Investment, uncertainty and pre-emption," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 278-287, May.
  11. repec:dgr:kubcen:200281 is not listed on IDEAS
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