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Search, Project Adoption and the Fear of Commitment

Author

Listed:
  • Vidya Atal

    (Montclair State University)

  • Talia Bar

    (University of Connecticut)

  • Sidartha Gordon

    (Université Paris-Dauphine)

Abstract

We examine project adoption decisions of firms constrained in the number of projects they can handle at once. Adoption requires a commitment for a period of uncertain duration, restricting the firm in subsequent periods. Capacity constraints create a “fear of commitment” — some positive return projects are not adopted. In the sequential move dynamic game, the second mover sometimes adopts projects that were rejected by the first, even when both firms are symmetric and equally informed. We study the e§ects of competition on the fear of commitment, and compare the jointly optimal adoption decision to the behavior of strategic non-cooperative firms.

Suggested Citation

  • Vidya Atal & Talia Bar & Sidartha Gordon, 2013. "Search, Project Adoption and the Fear of Commitment," Sciences Po Economics Discussion Papers 2013-12, Sciences Po Departement of Economics.
    • Handle: RePEc:spo:wpecon:info:hdl:2441/7o52iohb7k6srk09n8t8j8cil
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    adoption; project selection; commitment; Markov perfect equilibrium;
    All these keywords.

    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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