The effects of information on strategic investment and welfare (Q2494022)

The paper concerns on the influence of uncertainty and competition on the strategic considerations of a firm's investment decision. It extends the strategic real options literature in the direction of imperfect information. It is shown that the presence of information streams and uncertainty concerning the profitability of a new market leads to hybrid welfare results. Two observations are in the preemption case. Firstly, more or better information does not always lead to higher welfare. Secondly, it is not obvious whether a monopoly or a duopoly leads to higher welfare levels. Simulations suggest that duopoly yields higher welfare than monopoly for low levels of quantity and quality of information, while the converse holds for high levels.