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Duopolistic competition under risk aversion and uncertainty
Stockholm University, Faculty of Social Sciences, Department of Computer and Systems Sciences. University of London, England.
2014 (English)In: European Journal of Operational Research, ISSN 0377-2217, E-ISSN 1872-6860, Vol. 236, no 2, 643-656 p.Article in journal (Refereed) Published
Abstract [en]

A monopolist typically defers entry into an industry as both price uncertainty and the level of risk aversion increase. By contrast, the presence of a rival typically hastens entry under risk neutrality. Here, we examine these two opposing effects in a duopoly setting. We demonstrate that the value of a firm and its entry decision behave differently with risk aversion and uncertainty depending on the type of competition. Interestingly, if the leader's role is defined endogenously, then higher uncertainty makes her relatively better off, whereas with the roles exogenously defined, the impact of uncertainty is ambiguous.

Place, publisher, year, edition, pages
2014. Vol. 236, no 2, 643-656 p.
Keyword [en]
Investment analysis, Real options, Competition, Risk aversion
National Category
Information Systems
Identifiers
URN: urn:nbn:se:su:diva-104116DOI: 10.1016/j.ejor.2014.01.018ISI: 000334143100024OAI: oai:DiVA.org:su-104116DiVA: diva2:721003
Note

AuthorCount:3;

Available from: 2014-06-03 Created: 2014-06-03 Last updated: 2017-12-05Bibliographically approved

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