The Optimal Decision to Invest in a Duopoly Market for (Two) Positioned Companies when there are Hidden Competitors

• Type: Article in International Conference Proceedings Book
• Date: 2004

Authors

Paulo Jorge Pereira (Author) FEP; Armada, Manuel R (Author) FEP

Conference proceedings International

Title: 8th Annual International Conference on Real Options

ROC 2004

Montreal, Canada, June 2004

Scientific classification

FOS: Social sciences > Other social sciences

Other information

Abstract (EN): The aim of this paper is to study the option to invest in a duopoly market, allowing for more competitors to enter the market. In fact, we relax the common assumption which states that (only) two firms compete for the two places in the market. In the existing models, the problem consists of, basically, defining which one will be the leader, which will be the follower, and when. We can say that, in these settings, the investment opportunities are semi-proprietary, since the follower's position is, at least, guaranteed for both firms. As we said, our approach relaxes this assumption, allowing for more than two competitors for the positions on the duopoly. This additional competition has, as we will see, a major impact on the decision to invest. We also allow for both ex-post symmetry and ex-post asymmetry, and for asymmetrical investment costs for the leader and for the follower.

Language: English

Type (Professor's evaluation): Scientific