Real options in an asymmetric duopoly: who benefits from your competitive disadvantage?

This paper analyzes the impact of investment cost asymmetry on the optimal real option exercise strategies and the value of firms in duopoly. Both firms have an opportunity to invest in a project enhancing (ceteris paribus) the profit flow. We show that three types of equilibrium strategies exist. Furthermore, we express the critical levels of cost asymmetry delineating the equilibrium regions as functions of basic economic variables. The presence of strategic interactions among the firms leads to counterintuitive results. First, for a certain range of the asymmetry level, a marginal increase in the investment cost of the firm with the cost disadvantage can enhance this firm's own value. Moreover, such a cost increase can reduce the value of the competitor. Finally, we discuss the welfare implications of the optimal exercise strategies and show that the presence of identical firms can result in a socially less desirable outcome than if one of the competitors has a significant cost (dis)advantage

Has the Internet Eliminated Regional Price Differences? Evidence from the Used Car Market

internet, regional price differences, D12, D43, D83, L10,

Licensing vs. Litigation: The Effect of the Legal System on Incentives to Innovate

[[abstract]]With uncertain scope of patent protection and imperfect enforcement, the effective strength of patent protection is determined by the legal system. We analyze how the legal system affects the incentives of firms to innovate, taking into account possibilities of strategic licensing and litigation to deter imitation. The legal system that guarantees the patentee's monopoly power maximizes the R&D intensities. However, the legal system that induces licensing provides incentives to exert R&D effort while preserving ex post efficiency. We also compare R&D, patent licensing, and litigation behavior under American and English rules of legal cost allocation.[[notice]]補正完畢[[journaltype]]國外[[booktype]]紙本[[countrycodes]]US

Is the January effect still alive in the futures markets?

January effect, Futures markets, Small capitalized stocks, G12, G14,

IS THE DEFENCE MARKET CONTESTABLE? THE CASE OF MILITARY AEROSPACE

I demonstrate the existence of two sources of contestability in the military aerospace market, within producing and export countries, through the State's triple role as unique buyer, regulator and seller. For the producing countries, I introduce the new concept, 'sovereignty price'; that is, the profit a State agrees to grant to its defence firms to perpetuate their domestic activities. This subjective, evolutionary concept provides a dynamic character to the theory of contestable markets. Moreover, I show that contestability is more effective than antitrust policies and a solution of the cost disease. Empirical cases are shown to confirm the theoretical analysis.Common Operating System, Contestable markets, Cost disease, Aerospace, Regulation, Sovereignty price,