Developing Real Option Game Models

31 Pages Posted: 10 Feb 2014

See all articles by Alcino Azevedo

Alcino Azevedo

Aston Business School

Dean A. Paxson

Manchester Business School; University of Manchester - Manchester Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 9, 2014

Abstract

By mixing concepts from both game theoretic analysis and real options theory, an investment decision in a competitive market can be seen as a "game" between firms, as firms implicitly take into account other firms’ reactions to their own investment actions. We review two decades of real option game models, suggesting which critical problems have been "solved" by considering game theory, and which significant problems have not been yet adequately addressed. We provide some insights on the plausible empirical applications, or shortfalls in applications to date, and suggest some promising avenues for future research.

Keywords: Finance, Real Option Games, Investment Analysis, Strategic Investment

Suggested Citation

Azevedo, Alcino and Paxson, Dean A., Developing Real Option Game Models (February 9, 2014). Available at SSRN: https://ssrn.com/abstract=2393174 or http://dx.doi.org/10.2139/ssrn.2393174

Alcino Azevedo (Contact Author)

Aston Business School ( email )

Econ., Finance & Enterpreneurship
Aston Business School
Birmingham, B4 7ET
United Kingdom

Dean A. Paxson

Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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