Martzoukos, Spiros H and Zacharias, Eleftherios (2008): Real Option Games with R&D and Learning Spillovers.
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We model pre-investment R&D decisions in the presence of spillover effects in an option pricing framework with analytic tractability. Two firms face two decisions that are solved for 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 stochastic game with (path-dependency inducing) switching costs that make strategy revisions harder. Strategy shifts are easier to observe in more volatile environments.
|Item Type:||MPRA Paper|
|Original Title:||Real Option Games with R&D and Learning Spillovers|
|Keywords:||Benefit Analysis; Real Options; Coordination Games; R&D|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing
|Depositing User:||Eleftherios /E Zacharias|
|Date Deposited:||14. Jan 2009 09:11|
|Last Modified:||12. Feb 2013 20:50|
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