TY  - GEN
AB  - In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option to switch from the present market to a new market.
We construct a subgame perfect equilibrium in mixed strategies and show that both preemption and attrition can occur along typical equilibrium paths. In order to determine the attrition region a two-dimensional constrained optimal stopping problem needs to be
solved, for which we characterize the non-trivial stopping boundary in the state space.
We explicitly determine Markovian equilibrium stopping rates in the attrition region and show that there is always a positive probability of eventual preemption, contrasting the deterministic version of the model. A simulation-based numerical example illustrates
the model and shows the relative likelihoods of investment taking place in attrition and preemption regions.
DA  - 2015
KW  - two-dimensional optimal stopping.
KW  - Markovperfect equilibrium
KW  - real options
KW  - war of attrition
KW  - preemption
KW  - Stochastic timing games
LA  - eng
PY  - 2015
SN  - 0931-6558
SP  - 35-
TI  - Quick or Persistent? Strategic Investment Demanding Versatility
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-27573106
Y2  - 2024-11-24T02:30:59
ER  -