Option game on R&D investment decision under uncertainty: The case of labor-managed and profit-maximizing firms

Author

Jianli, Luo ; Weijun, Zhong

Author_Institution

Sch. of Bus., Wenzhou Univ., Wenzhou, China

fYear

2009

fDate

10-12 Nov. 2009

Firstpage

1172

Lastpage

1176

Abstract

Based on the uncertainty of market size and results of R&D, combining with characters of labor-managed firms, we develop a model of technology innovation in the duopoly market of labor-managed and profit-maximizing firm coexisting, and analyze the effects of some facts on option value of R&D investment in the labor-managed firm. Our results show that option value of R&D investment in the labor-managed firm is proportional to the raise of labor´s productivity, and inversely proportional to the maximal investment of successful R&D. However, option value of R&D investment in the labor-managed firm has uncertain relation to its own R&D investment and expectant market size, which is different from the results of profit-maximizing firms.

Keywords

game theory; innovation management; investment; research and development management; R&D investment decision; duopoly market; labor-managed firms; option game; profit-maximizing firms; technology innovation; Cost accounting; Decision trees; Forward contracts; Intelligent systems; Investments; Profitability; Research and development; Stochastic processes; Technological innovation; Uncertainty;

fLanguage

English

Publisher

ieee

Conference_Titel

Grey Systems and Intelligent Services, 2009. GSIS 2009. IEEE International Conference on

Conference_Location

Nanjing

Print_ISBN

978-1-4244-4914-9

Electronic_ISBN

978-1-4244-4916-3

Type

conf

DOI

10.1109/GSIS.2009.5408089

Filename

5408089