Ramsey Waits: A Theory of Non-Exclusive Real Options with First-Mover Advantages
This paper analyses the exercise decision of non-exclusive real options in a two-player setting. A general model of non-exclusive real options, allowing the underlying asset to follow any strong Markov process is developed, thus extending the existing literature, which is mainly based on one-dimensional geometric Brownian motion. For games with a first-mover advantage it is proved that an equilibrium with the rent-equalisation property exists. As an example, a duopoly where two firms can adopt a new technology, whose profitability follows a two-dimensional, correlated geometric Brownian motion is studied.
|Date of creation:||Jun 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
Phone: (0)1904 323776
Web page: http://www.york.ac.uk/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon, Leo K. & Stinchcombe, Maxwell B., 1987.
"Extensive From Games in Continuous Time: Pure Strategies,"
Department of Economics, Working Paper Series
qt03x115sh, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Simon, Leo K & Stinchcombe, Maxwell B, 1989. "Extensive Form Games in Continuous Time: Pure Strategies," Econometrica, Econometric Society, vol. 57(5), pages 1171-1214, September.
- Leo K. Simon and Maxwell B. Stinchcombe., 1987. "Extensive Form Games in Continuous Time: Pure Strategies," Economics Working Papers 8746, University of California at Berkeley.
- Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
- Jacco Thijssen & Kuno Huisman & Peter Kort, 2006.
"The effects of information on strategic investment and welfare,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(2), pages 399-424, 06.
- J.J.J. Thijssen & K.J.M. Huisman & P.M. Kort, 2003. "The Effects of Information on Strategic Investment and Welfare," Trinity Economics Papers 200310, Trinity College Dublin, Department of Economics.
- Pauli Murto, 2004. "Exit in Duopoly Under Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 111-127, Spring.
- Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 383-401.
- Simon, Leo K., 1987. "A Multistage Duel in Continuous Time," Department of Economics, Working Paper Series qt7186g3c4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Simon, Leo K., 1987. "Basic Timing Games," Department of Economics, Working Paper Series qt8kt5h29p, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Huisman, K.J.M. & Kort, P.M., 1999. "Effects of Strategic Interactions on the Option Value of Waiting," Discussion Paper 1999-92, Tilburg University, Center for Economic Research.
- Helen Weeds, 2002.
"Strategic Delay in a Real Options Model of R&D Competition,"
Review of Economic Studies,
Oxford University Press, vol. 69(3), pages 729-747.
- Weeds, H., 2000. "Strategic Delay in a Real Optimna Model of R&D Competition," The Warwick Economics Research Paper Series (TWERPS) 576, University of Warwick, Department of Economics.
- Leo K. Simon., 1987. "Basic Timing Games," Economics Working Papers 8745, University of California at Berkeley.
- Dutta Prajit K. & Rustichini Aldo, 1995. "(s, S) Equilibria in Stochastic Games," Journal of Economic Theory, Elsevier, vol. 67(1), pages 1-39, October.
- repec:fth:tilbur:9992 is not listed on IDEAS
- Grenadier, Steven R, 1996. " The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, vol. 51(5), pages 1653-79, December.
- Leo K. Simon., 1987. "A Multistage Duel in Continuous Time," Economics Working Papers 8757, University of California at Berkeley.
When requesting a correction, please mention this item's handle: RePEc:yor:yorken:07/17. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson)
If references are entirely missing, you can add them using this form.