This paper provides a general characterization of subgame-perfect equilibria for a

strategic timing problem, where two firms have the (real) option to invest irreversibly

in some market. Profit streams are uncertain and depend on the market structure. The

analysis of the problem emphasizes its dynamic nature and exploits only its economic

structure. In particular, the determination of equilibria with preemption is reduced to

solving a single class of constrained stopping problems. The general results are applied to

typical state-space models from the literature, to point out common deficits in equilibrium

arguments and to suggest alternative equilibria that are Pareto improvements.