Project Selection: Commitment and Competition

We examine project selection decisions of …rms constrained in the number of projects they can handle at once. Taking on a project requires a commitment of uncertain duration, restricting the …rm from selecting another project in subsequent periods. Due to the capacity constraints and need for commitment, some positive return projects are rejected. In a sequential move dynamic game, we fi…nd that the …first mover strategically rejects some projects that are then selected by the second mover, even when both fi…rms are symmetric and equally informed. We study the effects of competition on project selection, and compare the jointly optimal selection decision to the behavior of strategic non-cooperative …firms.