Competition and the Bad News Principle in a Real Options Framework
We study the investment timing problem where two firms that compete for investment preemption know in advance the time at which the economic condition changes. We show that the so-called Bad News Principle applies to the leader firm’s investment decision near maturity in many cases. This result indicates that the option value to wait does have an impact even in a competitive situation, which is in contrast to the previous literature.
|Date of creation:||Apr 2013|
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- Robert Lensink, 2002. "Is the uncertainty-investment link non-linear? Empirical evidence for developed economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(1), pages 131-147, March.
- Nielsen, Martin J., 2002. "Competition and irreversible investments," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 731-743, May. Full references (including those not matched with items on IDEAS)
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