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Coinvestment games under uncertainty

Author

Listed:
  • Benoit Chevalier-Roignant

    (EM - EMLyon Business School)

  • Stéphane Villeneuve

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Fabien Delpech

    (NCO - Nanostructures et chimie organométallique (LPCNO) - LPCNO - Laboratoire de physique et chimie des nano-objets - INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse - ICT - Institut de Chimie de Toulouse - IRD - Institut de Recherche pour le Développement - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - INC-CNRS - Institut de Chimie - CNRS Chimie - CNRS - Centre National de la Recherche Scientifique - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - FeRMI - Fédération de recherche « Matière et interactions » - INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique)

  • May-Line Grapotte

    (NCO - Nanostructures et chimie organométallique (LPCNO) - LPCNO - Laboratoire de physique et chimie des nano-objets - INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse - ICT - Institut de Chimie de Toulouse - IRD - Institut de Recherche pour le Développement - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - INC-CNRS - Institut de Chimie - CNRS Chimie - CNRS - Centre National de la Recherche Scientifique - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - FeRMI - Fédération de recherche « Matière et interactions » - INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique)

Abstract

There are many business situations in which investments by a supplier and a producer ("coinvest-ments") are both necessary for either of them to grasp a business opportunity. For instance, better quality tanks are needed to manufacture reliable hydrogen-powered vehicles. One of these two firms, typically the one facing a lower cost, may be more willing to invest, but the cautionary attitude of the other delays the coinvestment. We model supply-chain interactions in a classical tractable way to derive the firms' net present values (NPVs) upon coinvestment and determine their Nash equilibrium investment (timing) strategies. Firms coinvest when the real options of the weaker firm is ‘deep in the money.' These business situations are likely to be affected by evolving market circumstances, in particular due to changes in the demand dynamics or endogenous decision (by, say, the supplier) to conduct research and development (R&D). We investigate related model extensions, which confirm the robustness of our key result.

Suggested Citation

  • Benoit Chevalier-Roignant & Stéphane Villeneuve & Fabien Delpech & May-Line Grapotte, 2025. "Coinvestment games under uncertainty," Working Papers hal-05030259, HAL.
    • Handle: RePEc:hal:wpaper:hal-05030259
    Note: View the original document on HAL open archive server: https://hal.science/hal-05030259v1
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