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1297. Investment, partial irreversibility, and competition
Contributed abstract in session WD-57: Real Option Analysis, stream Real Option Analysis.
Wednesday, 14:30-16:00Room: S06 (building: 101)
Authors (first author is the speaker)
| 1. | Takashi Shibata
|
| Graduate School of Management, Tokyo Metropolitan University | |
| 2. | Michi Nishihara
|
| Graduate School of Economics, Osaka University | |
| 3. | Yuan Tian
|
| Ryukoku University |
Abstract
This study considers the optimal investment timing decision when the investment is not completely irreversible in a competitive market.
As shown in Section 8.2 of Dixit and Pindyck (1994), the optimal investment decision is independent of the degree of competition when the investment is completely irreversible. This study finds that the optimal investment decision depends on the degree of competition when the investment is not completely irreversible. As an extreme case, if the competition is strongly intense, the firm never invests. The weaker the competition, the later the investment is exercised.
Keywords
- Financial Modelling
- Finance and Banking
Status: accepted
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