Option-Game Approach to Analyze Technology Innovation Investment under Fuzzy Environment

Based on the model of symmetric and asymmetric duopoly option game, this paper discusses the present value of profit flows and the sunk investment costs for the trapezoidal fuzzy number. It constructs the fuzzy expressions of the investment value and investment threshold of followers and leaders under fuzzy environment and conducts numerical analysis. This offers a kind of explanation to the investment strategies under fuzzy environment

Investment Timing and Capacity Choice under Uncertainty

This paper examines strategic investment between two firms that compete not only for investment timing but also for capacity under stochastic market demand. The value functions of real option for the follower, the dominant leader, and the preemptive leader are derived and their investment decisions are investigated. It finds that both firms will delay investment and the delayed margin of the follower will surpass that of the leader under greater uncertainty. Furthermore, both firms will provide more outputs in the face of increasing uncertainty and the growth rate of the follower’s capacity will exceed that of the leader’s. In addition, this paper finds that the follower will end up with a larger capacity than the leader

DECISIONES DE INVERSIÓN A TRAVÉS DE OPCIONES REALES

RESUMENDadas las limitaciones que presentanlos métodos tradicionales de valoración de inversiones, y su dificultad para adaptarse a entornos cambiantes, se explora el método de opciones reales, el cual considera los intangibles y la flexibilidad operativa como elementos que pueden alterar la decisión de realizar un proyecto. El presente artículo da una mirada general a las opciones reales, sus conceptos,modelos, tipología, y presenta al final una aplicación al sector de la construcción. Se concluye que los métodosbasados en opciones reales son más adecuados para la evaluación de proyectos, dada su flexibilidad e inclusión de elementos intangibles;sin embargo, se resalta cómo el éxito de la valoración depende en buena medida de los supuestos e informacióndisponible para realizarla.Opciones reales, valoración de proyectosde inversión, sector construcción.

Strategic Investment Timing Under Profit Complementarities

This paper analyses strategic investment games between two firms that compete for the adoption of a new more efficient technology whose returns are uncertain. We assume that once one of the two firms adopted the new technology, joint adoption is preferable for both firms, that is there are profit complementarities in the product market. There are, moreover, externalities derivig from the first firm's investment. By modelling the switch from a well established technology to a new one as a dynamic stochastic game, we fully characterize the equilibria of the game under both non-cooperative and cooperative firms' behaviour. We show that in the cooperative equilibrium firms will invest later under negative externalities and earlier under positive externalities. Thus we identify circumstances in which competiton can be suboptimal (too much waiting). Overall, compared to earlier models that only allow for a new market game, our model examines a richer set of strategic interactions of adoption decisions

Fuzzy Optimization of Option Pricing Model and Its Application in Land Expropriation

Option pricing is irreversible, fuzzy, and flexible. The fuzzy measure which is used for real option pricing is a useful supplement to the traditional real option pricing method. Based on the review of the concepts of the mean and variance of trapezoidal fuzzy number and the combination with the Carlsson-Fuller model, the trapezoidal fuzzy variable can be used to represent the current price of land expropriation and the sale price of land on the option day. Fuzzy Black-Scholes option pricing model can be constructed under fuzzy environment and problems also can be solved and discussed through numerical examples

Overbuilding and development cascades under irrational expectations

The recent sluggish recovery in the U.S. house market has further motivated our research interests in overbuilding in real estate markets. Our model is an extension to Grenadier's (1996), who emphasizes rational investment decisions possibly leading to oversupply in real estate markets, by further allowing for the important implication of irrational expectation for the strategic interaction amongst competing investors. In this model, two market participants are asymmetric because one of them is allowed to have heterogeneous expectations about the growth and volatility of demand shocks. Unlike most of previous studies that only simply think of this phenomenon as a result of irrationality, our model further finds that irrational investors’ value-maximizing investment choices matter in understanding the strategic interaction of investment decisions in real estate markets, therefore providing additional insights into overbuilding and other puzzling phenomena in real estate markets

Real Options and Signaling in Strategic Investment Games

A game in which an incumbent and an entrant decide the timings of entries into a new market is investigated. The profit flows involve two uncertain factors: (1) the basic level of the demand of the market observed only by the incumbent and (2) the fluctuation of the profit flow described by a geometric Brownian motion that is common to both firms. The optimal timing for the incumbent, who privately knows the high demand, is earlier than that for the low-demand incumbent. This earlier entrance, however, reveals the information of the high demand to the entrant, so that the entrant observing the timing of the incumbent would accelerate the its own timing of the investment that reduces the monopolistic profit of the incumbent. Therefore, the high-demand incumbent may delay the timing of the investment in order to hide the information strategically. The equilibria of this signaling game are characterized, and the conditions for the manipulative revelation are investigated. The values of both firms are compared with the case of complete information.Real Option, Investment Timing, Signaling, Asymmetric Information, Game Theory

Developing real option game models

By mixing concepts from both game theoretic analysis and real options theory, an investment decision in a competitive market can be seen as a ‘‘game’’ between firms, as firms implicitly take into account other firms’ reactions to their own investment actions. We review two decades of real option game models, suggesting which critical problems have been ‘‘solved’’ by considering game theory, and which significant problems have not been yet adequately addressed. We provide some insights on the plausible empirical applications, or shortfalls in applications to date, and suggest some promising avenues for future research

Herramientas para evaluar estrategias desde la perspectiva de rentabilidad: Análisis bibliográfico de las distintas metodologías de evaluación

Keywords: evaluation, project and investment, strategy, valueAbstract. Among the different methods that presently exist in published literature regarding business strategy evaluation, there are those that refer to financial and economic feasibility. The present document aims to list and explain the main and most used of these methods, as well as to present other real options that have recently become part of this field of study, and then proceeds to make a comparison between them. It concludes with recommendations on which of these should be used in the present business environment.Palabras clave: estrategia, evaluacion, proyecto e inversion, valorResumen. Dentro de los diferentes métodos que existen en la literatura de evaluación de estrategias empresariales, se encuentran las que hacen referencia a la factibilidad financiera y económica, este documento busca enumerar y explicar las principales y mas usadas, así como presentar la metodología de opciones reales que recientemente se ha unido a esta disciplina, también se hace una comparación entre estas y se concluye con recomendaciones de cuales deberían de ser usadas en el entorno de negocios actual