Evolution of Conjectures in Cournot Oligopoly

This paper considers a dynamic market where a fixed number of firms engages in Cournot oligopoly.  Firms choose the output level based on their assessment of the competitors' reaction to their output choice.  This is parameterized using an approach reminiscent of conjectural variations.  On a second level firms adapt their conjectural variation by imitating the most successful firm.  Simulations suggest that in the long-run the Walrasian, Cournot-Nash and cartel equilibria survive.  The theory of nearly-complete decomposability is used to show that the Walrasian equilibrium is approximately the only stochastically stable state.

Ramsey Waits: A Theory of Non-Exclusive Real Options with First-Mover Advantages

This paper analyses the exercise decision of non-exclusive real options in a two-player setting. A general model of non-exclusive real options, allowing the underlying asset to follow any strong Markov process is developed, thus extending the existing literature, which is mainly based on one-dimensional geometric Brownian motion. For games with a first-mover advantage it is proved that an equilibrium with the rent-equalisation property exists. As an example, a duopoly where two firms can adopt a new technology, whose profitability follows a two-dimensional, correlated geometric Brownian motion is studied.Timing games, real options, rent equalisation, technology adoption

Nearly-complete Decomposability and Stochastic Stability with an Application to Cournot Oligopoly

This paper presents a general framework for analysing stochastic stability in models with evolution at two levels. Under certain conditions the theory of nearly-complete decomposability can be used to disentangle these two levels. They can then be studied separately and the equilibrium of one can be used to obtain the equilibrium of the other. This gives an approximation of the equi- librium of the combined dynamics. This approached is applied to a model of conjectural variation and imitation in Cournot oligopoly. If behavioural change takes place infrequently, the Walrasian equilibrium is the unique stochastically stable outcome. As a corollary, it is indicated that smaller industries are more competitive than larger ones.

Ramsey Waits: A Computational Study on General Equilibrium Pricing of Derivative Securities

This paper analyses the accuracy of replicating portfolio methods in predicting asset prices. In a two-period, general equilibrium model with incomplete financial markets and heterogeneous agents, a computational study is conducted under various distributional assumptions. We focus on the price of a call option on an underlying risky asset. There is evidence that the value of the (approximate) replicating portfolio is a good approximation for the general equilibrium price for CRRA preferences, but not for CARA preferences. Furthermore, there is strong evidence that the introduction of the call option reduces market incompleteness and that the price of the underlying asset is unchanged. There is, however, inconclusive evidence on whether the availability of the option increases agents' welfare.Asset pricing, general equilibrium, incomplete markets

Stochastic Stability of Cooperative and Competitive Behavior in Cournot Oligopoly

oligopoly theory;stochastic stability;decomposability

Valuing voluntary disclosure using a real options approach

This paper outlines a real options approach to valuing those announcements which are made by firms outside of their legal requirements. From the firm's perspective, information is disclosed only if the manager of the firm is sufficiently certain that the market response to the announcement will have a positive impact on the value of the firm. When debt financing is possible we find that the manager adopts a more transparent disclosure policy, thus violating the Modigliani-Miller theorem on irrelevance of capital structure

Correction of concentrated and distributed aberrations in medical ultrasound imaging

A method is presented for iterative correction of wave fields aberrated in a plane located at an arbitrary distance from an array transducer. The signals received from the transducer are processed by an inverse extrapolator in such a way that the output yields the transducer signals as if the transducer had been located directly at the position of the aberrator. For subsequent transmission cycles, the same inverse extrapolator is applied to delta pulses at time instants incorporating the time-reversed estimated aberration profile. The method can be applied to scattering and absorptive media, i.e. in medical conditions. The compensation of distributed aberration is also developed. It is shown that correction algorithms intended for concentrated aberrations can be used to reduce effects due to distributed aberrations; our conclusions with respect to the position of the equivalent concentrated aberrator differ from results reported in the literature. The method is demonstrated on realistic simulations of solid lesions, and cysts (voids) disturbed by intervening aberrating medi

Equilibria in Continuous Time Preemption Games with Markovian Payoffs

This paper studies timing games in continuous time where payoffs are stochastic and strongly Markovian. The main interest is in characterizing equilibria where players preempt each other along almost every sample path. It is found that the existence of such preemption equilibria depends crucially on whether there is a coordination mechanism that allows for rent equalization or not, and whether the stochastic payoffs admit upward jumps. Through numerical examples it is argued that the possibility of such coordination improves social welfare and that the welfare loss due to preemption decreases in uncertainty.Timing Games, Real Options, Preemption