We study the development of a duopoly industry -evolution of firm capacities and competitive behavior- in a continuous-time real-options model of capacity investment. Our methodology allows the evaluation of investment options and exercise rules in a strategic setup. In the initial industry...

We study a simple duopoly model of preemption with multiple investments and instantaneous Bertrand competition in a stochastically growing market. Different patterns of equilibria may arise, depending on the importance of the real option effect. If the average growth rate of the market is close...