Lack of Preemption Under Irreversible Investment

Thomas Fagart

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This article considers the classic model of irreversible investment under imperfect competition and stochastic demand and characterizes the markov perfect equilibrium. To do so, I introduce a new way to define strategies permitting the players to create endogenous jumps in the state variable. The markov equilibrium is then similar to the open-loop equilibrium, meaning that the irreversibility of investment does not create a preemption effect in this model. This is due to the form of investment's cost, which creates an incentive to invest as soon as possible, reducing the strategic interaction to the one of a static problem.

Keywords: Capacity investment; Cournot competition; Markov-perfect equilibrium; Real option games; Differential games; Investissement en capacité; Concurrence à la Cournot; Equilibre markovien; Option réelle; Jeux différentielle (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-com
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01243559v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in 2015

Downloads: (external link)
https://shs.hal.science/halshs-01243559v1/document (application/pdf)

Related works:
Working Paper: Lack of Preemption Under Irreversible Investment (2015)
Working Paper: Lack of Preemption Under Irreversible Investment (2015)
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:hal:cesptp:halshs-01243559

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().