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TitleInvestment decisions in finite-lived monopolies
Author(s)Pereira, Paulo Jorge
Rodrigues, Artur
KeywordsFinite-lived monopolies
Real option games
Real options
Issue date2014
JournalJournal of economic dynamics and control
Abstract(s)This paper studies the value and optimal timing for investment in finite-lived monopolies, extending the literature on real option games by considering the cases of random and certain-lived monopolies. Under these settings, firms face the risk of demonopolization, that can occur as a random or a certain event. We show that these new settings produce significantly different results when compared to the canonical monopolistic and duopolistic models. In a certain-lived monopoly, the leader invests sooner than in a duopoly if there is a risk of being preempted, and later than in a monopoly if the leader role is pre-assigned. In a random-lived monopoly, entry occurs somewhere between the duopoly and monopoly cases. Higher uncertainty delays investment in all cases.
Publisher version
AccessRestricted access (UMinho)
Appears in Collections:NIPE - Artigos em Revistas de Circulação Internacional com Arbitragem Científica

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