We investigate the role of strategic considerations on the optimal timing of investment when firms compete for a new market (e.g., the provision of an innovative product) under demand uncertainty. Within a continuous time model of stochastic oligopoly, we show that strategic considerations are likely to be of limited impact when the new product is radically innovative whilst the fear of a rival's entry may deeply affect firms' decisions whenever innovation is to some extent limited. The welfare analysis shows surprisingly that the desirability of the different market structures considered does not depend on the fixed entry cost.
Marseguerra, G., Cortelezzi, F., Dominioni, A., Investment timing decisions in a stochastic duopoly model, <<CHAOS, SOLITONS AND FRACTALS>>, 2006; (29): 611-625. [doi:10.1016/j.chaos.2005.08.093] [http://hdl.handle.net/10807/84671]
Investment timing decisions in a stochastic duopoly model
Marseguerra, GiovanniPrimo
;Cortelezzi, FlaviaSecondo
;
2006
Abstract
We investigate the role of strategic considerations on the optimal timing of investment when firms compete for a new market (e.g., the provision of an innovative product) under demand uncertainty. Within a continuous time model of stochastic oligopoly, we show that strategic considerations are likely to be of limited impact when the new product is radically innovative whilst the fear of a rival's entry may deeply affect firms' decisions whenever innovation is to some extent limited. The welfare analysis shows surprisingly that the desirability of the different market structures considered does not depend on the fixed entry cost.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.