Strategic investment evaluation

Rishabh Kirpalani () and Erik Madsen ()
Additional contact information
Rishabh Kirpalani: Department of Economics, University of Wisconsin-Madison
Erik Madsen: Department of Economics, New York University

Theoretical Economics, 2023, vol. 18, issue 3

Abstract: We study the interaction of incentives to free-ride on information acquisition and strategically delay irreversible investment in environments in which multiple firms evaluate an investment opportunity. In our model, two firms decide how quickly to privately obtain information about the profitability of a project, and when (if ever) to publicly invest in it. Multiple equilibria exist, differing with respect to how much information firms acquire as well as how quickly they invest. The equilibrium which maximizes aggregate payoffs features asymmetric play with distinct leader and follower roles when firms are patient, but features symmetric play when firms are impatient and information acquisition costs are sufficiently high.

Keywords: Social learning; investment timing; strategic information acquisition (search for similar items in EconPapers)
JEL-codes: C73 D82 D83 G24 (search for similar items in EconPapers)
Date: 2023-07-20
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://econtheory.org/ojs/index.php/te/article/viewFile/20231141/37035/1124 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:4806

Access Statistics for this article

Theoretical Economics is currently edited by Simon Board, Todd D. Sarver, Juuso Toikka, Rakesh Vohra, Pierre-Olivier Weill

More articles in Theoretical Economics from Econometric Society
Bibliographic data for series maintained by Martin J. Osborne ().