Title :
Effect of preemption on the R&D investment decision
Author :
Yu, Dangping ; Zhang, Yajie
Author_Institution :
Inst. of Nat. Defense Econ. & Manage., Central Univ. of Finance & Econ., Beijing
Abstract :
This paper provided a option games framework of R&D investment evaluation and decision, and discussed the effect of first-moverpsilas advantages on R&D strategic investment decision made by firms. And we provided the close form of firm value function under the stochastic conditions of both project yield and operation cost and asymmetric cost of investment, and studied further the effect of equilibrium type, factor volatility and its correlation, and first-moverpsilas advantages on the optimal investment thresholds, value function and investment time interval. Some new and significant conclusions are drawn and verified further by a numerical example.
Keywords :
decision making; investment; pricing; research and development; share prices; stochastic games; asymmetric cost; equilibrium type effect; factor volatility; firm R&D strategic investment decision making; firm value function; first-mover advantage; operation cost; option games framework; project yield; stochastic condition; Investments; First-mover’s Advantages; Investment Decision; Option Games; Preemption; Real Options;
Conference_Titel :
Control and Decision Conference, 2008. CCDC 2008. Chinese
Conference_Location :
Yantai, Shandong
Print_ISBN :
978-1-4244-1733-9
Electronic_ISBN :
978-1-4244-1734-6
DOI :
10.1109/CCDC.2008.4597694
