Investment under uncertainty, competition and regulation

DOI10.3934/JDG.2014.1.579MaRDI QIDQ258740zbMATH OpenOpenAlexFDO

Authors Adrien Nguyen Huu

Publication date 10 March 2016

Published in Journal of Dynamics and Games (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1309.1844

zbMATH Keywords

investmentregulationCournot competitionpreemption gamereal option gameStackelberg competition

Mathematics Subject Classification ID

Applications of game theory (91A80) Noncooperative games (91A10) Corporate finance (dividends, real options, etc.) (91G50) Special types of economic markets (including Cournot, Bertrand) (91B54) Financial applications of other theories (91G80)

Abstract: We investigate a randomization procedure undertaken in real option games which can serve as a basic model of regulation in a duopoly model of preemptive investment. We recall the rigorous framework of [M. Grasselli, V. Lecl`ere and M. Ludkovsky, Priority Option: the value of being a leader, International Journal of Theoretical and Applied Finance, 16, 2013], and extend it to a random regulator. This model generalizes and unifies the different competitive frameworks proposed in the literature, and creates a new one similar to a Stackelberg leadership. We fully characterize strategic interactions in the several situations following from the parametrization of the regulator. Finally, we study the effect of the coordination game and uncertainty of outcome when agents are risk-averse, providing new intuitions for the standard case.

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Cites work

• Preemption and Rent Equalization in the Adoption of New Technology
• Preemption in a real option game with a first mover advantage and player-specific uncertainty
• Priority option: the value of being a leader
• Rational hedging and valuation of integrated risks under constant absolute risk aversion.
• Real options games in complete and incomplete markets with several decision makers
• Strategic Delay in a Real Options Model of R&D Competition
• Strategic investment under uncertainty: a synthesis
• Symmetric equilibrium strategies in game theoretic real option models
• The pricing of options and corporate liabilities

Cited in

(10)

• Investment under Uncertainty in Dynamic Conflicts
• Investment and uncertainty: Is there a potential role for a common European policy?
• Caveat preemptor: coordination failure and success in a duopoly investment game
• Financial liquidity: an emergent phenomena
• Investment, uncertainty, and price stabilization schemes
• Regulation, institutions and aggregate investment: new evidence from OECD countries
• Investor competition and project risk in venture capital investments
• Welfare implications of mitigating investment uncertainty
• A GAME MODEL OF IRREVERSIBLE INVESTMENT UNDER UNCERTAINTY
• Investment under uncertainty -- does competition matter?

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