Real option games with R&D and learning spillovers |
| |
Authors: | Spiros H. Martzoukos Eleftherios Zacharias |
| |
Affiliation: | 1. Department of Public and Business Administration, School of Economics and Management—University of Cyprus, P.O .Box 20537, CY 1678 Nicosia, Cyprus;2. Athens University of Economics and Business, Greece;3. Rimini Center for Economic Analysis, Italy |
| |
Abstract: | We demonstrate to decision makers how to optimally make costly strategic pre-investment R&D decisions in the presence of spillover effects in an option pricing framework with analytic tractability. Decisions are modeled as impulse-type controls with random outcome. Two firms face two decisions that are solved interdependently in a two-stage game. The first-stage decision is: What is the optimal level of coordination (optimal policy/technology choice)? The second-stage decision is: What is the optimal effort for a given level of the spillover effects and the cost of information acquisition? The framework is extended to a two-period closed-loop stochastic game with (path-dependency inducing) switching costs that make strategy revisions harder. When conditions of learning-by-doing exist, we find that strategy shifts are easier to observe in market environments of high growth and high volatility. |
| |
Keywords: | Cost benefit analysis Real options Game theory R& D |
本文献已被 ScienceDirect 等数据库收录! |