Search, Project Adoption and the Fear of Commitment

Vidya Atal, Talia Bar and Sidartha Gordon (sidartha.gordon@sciences-po.org)
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Sidartha Gordon: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres

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Abstract: We examine project adoption decisions of firms constrained in the number of projects they can handle at once. Adoption requires a commitment for a period of uncertain duration, restricting the firm in subsequent periods. Capacity constraints create a "fear of commitment" — some positive return projects are not adopted. In the sequential move dynamic game, the second mover sometimes adopts projects that were rejected by the first, even when both firms are symmetric and equally informed. We study the e§ects of competition on the fear of commitment, and compare the jointly optimal adoption decision to the behavior of strategic non-cooperative firms.

Keywords: adoption; project selection; commitment; Markov perfect equilibrium (search for similar items in EconPapers)
Date: 2013-07-01
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