Showing 1 - 10 of 59
We study a stochastic version of Fudenberg and Tirole's (1985) preemption game to analyze the effects of jumps in the underlying uncertainty on equilibrium strategies. Two firms contemplate entering a new market where the demand follows a jump-diffusion process. Firms differ is the sunk costs of...
Persistent link: https://www.econbiz.de/10013125149
Risks related to events that arrive randomly play important role in many real life decisions, and models of learning and experimentation based on two-armed Poisson bandits addressed several important aspects related to strategic and motivational learning in cases when events arrive at jump times...
Persistent link: https://www.econbiz.de/10012958670
I consider a stopping game between two players, where observations related to an unknown state of the nature arrive at random. Players not only learn from observing each other, but their payoffs also depend on the presence of the counterpart. I derive a general characterization of an equilibrium...
Persistent link: https://www.econbiz.de/10012870821
In the standard optimal stopping problems, actions are artificially restricted to the moments of observations of costs or benefits. In the standard experimentation and learning models based on two-armed Poisson bandits, it is possible to take an action between two sequential observations. The...
Persistent link: https://www.econbiz.de/10013017101
An ambiguity averse decision-maker contemplates investment of a fixed size capital into a project with a stochastic profit stream under the Knightian uncertainty. Multiple priors are modeled as a "cloud" of diffusion processes with embedded compound Poisson jumps. The "cloud" contains the...
Persistent link: https://www.econbiz.de/10013045142
We study a stochastic version of Fudenberg -- Tirole's preemption game. Two firms contemplate entering a new market with stochastic demand. Firms differ in sunk costs of entry. If the demand process has no upward jumps, the low cost firm enters first, and the high cost firm follows. If leader's...
Persistent link: https://www.econbiz.de/10013045255
Models of learning and experimentation based on two-armed Poisson bandits addressed several important aspects related to strategic and motivational learning, but they are not suitable to study effects that accumulate over time. We propose a new class of models of strategic experimentation which...
Persistent link: https://www.econbiz.de/10012919919
I characterize an optimal, incentive compatible, and renegotiation proof contract of venture capital (VC ) financing of a startup (that may be successful or not) whose rate of arrival of success is a function of the accumulated investment stock. The contract depends on the startup valuation,...
Persistent link: https://www.econbiz.de/10013230140
This paper provides a general framework for pricing of real options in continuous time for wide classes of payoff streams that are functions of Levy processes. As applications, we calculate the option values of multi-stage investment/disinvestment problems (sequences of embedded options, which...
Persistent link: https://www.econbiz.de/10005069272
The risk of catastrophes is one of the greatest threats by climate change. Yet, the most common Integrated Assessment Models produce the counterintuitive result that a higher concern about climate change risks does not lead to stronger near-term abatement efforts. This paper probes whether this...
Persistent link: https://www.econbiz.de/10011301633