Real Option Games with R&D and Learning Spillovers

Spiros H Martzoukos and Eleftherios Zacharias

MPRA Paper from University Library of Munich, Germany

Abstract: We model pre-investment R&D decisions in the presence of spillover effects in an option pricing framework with analytic tractability. Two firms face two decisions that are solved for interdependently in a two-stage game. The first-stage decision is: what is the optimal level of coordination (optimal policy/technology choice)? The second-stage decision is: what is the optimal effort for a given level of the spillover effects and the cost of information acquisition? The framework is extended to a two-period stochastic game with (path-dependency inducing) switching costs that make strategy revisions harder. Strategy shifts are easier to observe in more volatile environments.

Keywords: Benefit Analysis; Real Options; Coordination Games; R&D (search for similar items in EconPapers)
JEL-codes: G13 G31 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-ino, nep-mic and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Real option games with R&D and learning spillovers (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:12686

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