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Symmetric Equilibrium Strategies in Game Theoretic Real Option Models with Incomplete Information

Delaney, L. ORCID: 0000-0003-0944-9894 (2018). Symmetric Equilibrium Strategies in Game Theoretic Real Option Models with Incomplete Information. Economics Letters, 174, pp. 42-47. doi: 10.1016/j.econlet.2018.10.020


This paper considers a real options model with incomplete information in a duopoly setting. I show that even in the presence of a first-mover advantage, there are circumstances in which the preemption region is eroded entirely and the only equilibrium strategy is of simultaneous-type: both players should exercise together or not at all. This outcome arises if the price paid by a player from exercising the option simultaneously with his competitor (over exercising alone as a Stackelberg leader) is low. Such an outcome has not been previously recognised in the literature. The underlying information structure has been applied in a one-firm setting to a range of different contexts of late, all of which have competitive pressures in practice. As such, the existence of this equilibrium under certain conditions ought to be recognised.

Publication Type: Article
Additional Information: © Elsevier, 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Publisher Keywords: Timing games; Real options; Preemption; Incomplete information
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Arts & Social Sciences > Economics
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This document is not freely accessible until 25 April 2020 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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