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In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option …. A simulation-based numerical example illustrates the model and shows the relative likelihoods of investment taking place …
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I model the strategic interaction between firms, that face decisions on investment, forward contracts and spot market … quantities. For an investment decision that takes place after firms have contracted forward but before firms compete on the spot … market (medium term investment), competition becomes fierce. Thus, the efficiency gains from forward trading found by Allaz …
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