Non-cooperative investment in partnerships and their termination

Franz Wirl

Central European Journal of Operations Research, 2009, vol. 17, issue 4, 479-494

Abstract: This paper investigates how partners (firms or husband and wife) should invest into an uncertain stock that provides a common good, when to stop investments and when to end their partnership. The assumption of lumpy investments leads to a real option problem which is solved for the cooperative and non-cooperative solutions. Yet despite the analytical solution, numerical means are necessary to investigate economic consequences: strong incentives to free ride under competition even turning one of the options—to stop investment at high stock levels—into one of a negative value; in contrast, divorce remains a positively valued option. Copyright Springer-Verlag 2009

Keywords: Stochastics; Real option game; Marriage; Divorce; J120; L140; C610 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:cejnor:v:17:y:2009:i:4:p:479-494

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DOI: 10.1007/s10100-009-0107-1

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