Waiting after the lower trigger: A Cournot Bertrand real option note

Elias Asproudis () and Eleftherios Filippiadis ()
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Elias Asproudis: Swansea University, School of Social Sciences, Department of Economics, UK
Eleftherios Filippiadis: Department of Economics, University of Macedonia, Greece

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: We study a perpetual entry problem in which an entrant chooses both when to enter and whether to enter through price or quantity competition against an incumbent that has already committed to quantity. The two entry modes are mutually exclusive and differ in sunk cost and discounted operating-profit coefficient. We focus on the case in which price entry is cheaper, while quantity entry is more profitable. Although price entry may then have the lower stand-alone trigger, crossing that trigger need not justify immediate entry. We provide a sufficient condition under which there exists a nonempty interval above the lower stand-alone trigger on which immediate entry in either mode is suboptimal. The entrant waits because delay preserves the option of entering later through the more profitable quantity mode. Thus, in a Cournot Bertrand environment with uncertainty and irreversibility, the choice of strategic variable is part of the real-options timing problem itself.

Keywords: real options; endogenous mode choice; Cournot–Bertrand competition; entry timing; uncertainty; strategic commitment. (search for similar items in EconPapers)
JEL-codes: C41 D25 D81 L13 (search for similar items in EconPapers)
Date: 2026-08, Revised 2026-08
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