On the Investment-Uncertainty Relationship

A Game Theoretic Real Option Approach

  • Elmar Lukas
  • Andreas Welling
Schlagworte: Real option, investment, uncertainty, managerial flexibility, game theory, JEL: G30, G13, C70, D81

Abstract

This paper examines the effect of uncertainty on investment timing in a game theoretical real option model. We extend the settings of Gryglewicz et al. (2008), Wong (2007), and Sarkar (2000) by a more general assumption, i.e. the investment is also influenced by the actions of a second player. The results show that a U-shaped investment-uncertainty relationship generally sustains. However, timing of an investment occurs inefficiently late. Moreover, we show that the influence of uncertainty on the associated first-mover advantage becomes ambiguous, too.

Veröffentlicht
2018-09-18
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