A Two-Stage Investment Game in Real Option Analysis on IS/IT Projects

Author

Zhang, Lingying ; Zheng, Shuling

Author_Institution

Harbin Inst. of Technol., Shenzhen Univ., Shenzhen, China

Volume

2

fYear

2009

fDate

26-27 Dec. 2009

Firstpage

425

Lastpage

428

Abstract

With the rapid development of information and communication technology, the decision makers of firms are facing many kinds of IS/IT projects investment opportunities, so they need to provide their preferences over a set of decision alternatives in order to maximize investment value of the projects. Considering the special characteristics of IS/IT projects, this paper develops a two-stage investment game model between two competitive firms on IS/IT projects. This model integrates the ideas of real option theory, game theory, NPV and dynamic programming method. At first, the investment thresholds are derived to divide the areas of market demand. Then the fully characterized equilibrium strategies for both firms are proposed based on these areas. The research in this paper provides a new analytical framework on the investment decision-making for IS/IT projects.

Keywords

dynamic programming; game theory; investment; IS-IT projects; NPV; dynamic programming method; game theory; real option analysis; real option theory; two-stage investment game; Communications technology; Costs; Educational institutions; Game theory; Information management; Innovation management; Investments; Project management; Technology management; Uncertainty; Information System/ Information Technology(IS/IT) projects; equilibrium strategy; investment threshold; option games; real option;

fLanguage

English

Publisher

ieee

Conference_Titel

Information Management, Innovation Management and Industrial Engineering, 2009 International Conference on

Conference_Location

Xi´an

Print_ISBN

978-0-7695-3876-1

Type

conf

DOI

10.1109/ICIII.2009.260

Filename

5370251