Other than traditional valuation methods, the real option approach captures the flexibility inherent in investment decisions to make the optimal decision of a finn in isolation from its competitors. In reality, howeve...Other than traditional valuation methods, the real option approach captures the flexibility inherent in investment decisions to make the optimal decision of a finn in isolation from its competitors. In reality, however, the actions or decisions of competing fn-ms （practical or potential） often affect each other＇s investment opportunity. The value of the project for the firms is assumed to follow a Geometric Brownian motion, and the model combines game theory and the theory of irreversible investment under uncertainty. This paper characterizes the resulting Nash equilibrium under different assumptions on the information that the firms have each other＇s valuation for the project.展开更多
文摘Other than traditional valuation methods, the real option approach captures the flexibility inherent in investment decisions to make the optimal decision of a finn in isolation from its competitors. In reality, however, the actions or decisions of competing fn-ms （practical or potential） often affect each other＇s investment opportunity. The value of the project for the firms is assumed to follow a Geometric Brownian motion, and the model combines game theory and the theory of irreversible investment under uncertainty. This paper characterizes the resulting Nash equilibrium under different assumptions on the information that the firms have each other＇s valuation for the project.
