Strategic Investment Under Uncertainty with First- and Second-mover Advantages

Released on by Min Dai
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  • Strategic Investment Under Uncertainty with First- and Second-mover Advantages Book Detail

  • Author : Min Dai
  • Release Date : 2022
  • Publisher :
  • Genre :
  • Pages : 0
  • ISBN 13 :
  • File Size : 11,11 MB
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Strategic Investment Under Uncertainty with First- and Second-mover Advantages by Min Dai PDF Summary

Book Description: We analyze a duopoly real-option entry game where the second mover has a cost advantage over the first mover. The equilibrium solution features five regions. In addition to the option-value-of-waiting and competing-to-enter (first-mover-advantage) regions (Fudenberg and Tirole, 1985; Grenadier, 1996), three new regions appear due to the second-mover advantage: a waiting-to-be-Follower region and two disconnected probabilistic-entry regions. Only when market demand is very high does Follower immediately enter after Leader does. The second-mover advantage causes firms to use state-contingent mixed strategies, significantly delaying their entry timing. Our model generates new predictions, e.g., entry likelihood is non-monotonic in market demand.

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Investment under Uncertainty

Investment under Uncertainty

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