THE CHOICE OF CAPACITY IN MIXED DUOPOLY UNDER DEMAND UNCERTAINTY*

The Effect Of Salvage Market On Strategic Technology Choice And Capacity Investment Decision Of Firm Under Demand Uncertainty

Strategic Technology Choice and Capacity Investment Under Demand Uncertainty

This paper studies the impact of competition on a firm’s choice of technology (product-flexible or product-dedicated) and capacity investment decisions. Specifically, we model two firms competing with each other in two markets characterized by price-dependent and uncertain demand. The firms make three decisions in the following sequence: choice of technology (technology game), capacity investme...

Credible Capacity Preemption in a Duopoly Market under Uncertainty

This paper explores firms’ incentives to engage in capacity preemption using a continuous-time real options game. Two ex ante identical firms can choose capacity and investment timing regarding the entry into a new industry whose demand grows until an unknown maturity date, after which it declines until it disappears. Previous literature usually predicts that the Stackelberg leader, whether end...

Exit in duopoly under uncertainty

This paper examines a declining duopoly, where the firms must choose when to exit from the market. The uncertainty is modeled by letting the revenue stream follow a geometric Brownian motion. We consider the Markovperfect equilibrium in firms’ exit strategies. With a low degree of uncertainty there is a unique equilibrium, where one of the firms always exits before the other. However, when unce...

Investment and capacity choice under uncertain demand

Papers published in this report series are preliminary versions of journal articles and not for quotations. Abstract This paper extends the real options literature by discussing an investment problem, where a firm has to determine optimal investment timing and optimal capacity choice at the same time under conditions of irreversible investment expenditures and uncertainty in future demand. Afte...