Investment in oligopoly under uncertainty: The accordion effect

Romain Bouis, Kuno J.M. Huisman and Peter Kort

International Journal of Industrial Organization, 2009, vol. 27, issue 2, pages 320-331

Abstract: This paper studies investments in new markets where more than two (anticipated) identical competitors are present. In case of three firms an accordion effect is detected: an exogenous demand shock results in a change of the wedge between investment thresholds of the first and second investor that is qualitatively different from the change of the wedge between the second and third investment threshold. Furthermore, it turns out that in the three-firm case the investment timing of the first investor lies in between the one and the two-firm case. These results are numerically extended to the n-firm case.

Keywords: Investment; under; uncertainty; Real; Options; Competition (search for similar items in EconPapers)
Date: 2009

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Related works:
Working Paper: Investment in oligopoly under uncertainty: the accordion effect (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:indorg:v:27:y:2009:i:2:p:320-331

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