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Author Zhu, Kevin ♦ Weyant, John
Source SpringerLink
Content type Text
Publisher Systems Engineering Society of China
File Format PDF
Copyright Year ©2003
Language English
Subject Domain (in DDC) Technology ♦ Engineering & allied operations
Subject Keyword Technology investment ♦ competition ♦ real options ♦ game theory ♦ dynamic games ♦ incomplete information ♦ technological systems ♦ technology innovation ♦ Systems and Information Theory in Engineering ♦ Game Theory/Mathematical Methods ♦ Operations Research/Decision Theory
Abstract Viewing investment projects in new technologies as real options, this paper studies the effects of endogenous competition and asymmetric information on the strategic exercise of real options. We first develop a multi-period, game-theoretic model and show how competition leads to early exercise and aggressive investment behaviors and how competition erodes option values. We then relax the typical full-information assumption found in the literature and allow information asymmetry to exist across firms. Our model shows, in contrast to the literature that payoff is independent of the ordering of exercise, that the sequential exercise of real options may generate both informational and payoff externalities. We also find some surprising but interesting results such as having more information is not necessarily better.
ISSN 10043756
Age Range 18 to 22 years ♦ above 22 year
Educational Use Research
Education Level UG and PG
Learning Resource Type Article
Publisher Date 2003-01-01
Publisher Place Beijing
e-ISSN 18619576
Journal Journal of Systems Science and Systems Engineering
Volume Number 12
Issue Number 3
Page Count 22
Starting Page 257
Ending Page 278

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Source: SpringerLink