A multi-factor decision-making model based on option games

This paper provides a framework of asymmetric duopoly option game and discusses the optimal strategy decision rules in corporate investment under the stochastic conditions of both product demand and operation cost which are correlative. We analyze especially the equilibrium rules of optimal strategy and its conditions and make comparative static analyses to the influence of each parameter to optimal thresholds after reducing investment value function and optimal investment threshold. The results show that the increase of uncertainty is not always to rise the optimal threshold when considering multi stochastic factors which are correlative. At last, some significant conclusions are made and explained, and the analytical result in theory is further verified and enriched by a numerical example, in which the influences of cost asymmetry, first mover advantage and correlation of stochastic factors to the optimal threshold and the equilibrium result are analyzed respectively and deeply.