This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents may improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge across firms. Each firm receives a private signal on the success...

An agent can exert effort to improve the quality of a signal that also depends on his ability. The signal will help him to choose an action, which, in turn will lead to some observable good or bad outcome. Transparency on actions can distort the agent's choices towards quot;smartquot; actions...

We develop a dynamic credit risk model for the case that banks compete to collect their loans from a firm falling in danger of bankruptcy. We apply a game-theoretic real options approach to investigate bankfs optimal strategies. Our model reveals that the bank with the larger loan amount, namely...

We develop a dynamic credit risk model for the case in which banks compete to collect their loans from a firm in danger of bankruptcy. We apply a game-theoretic real options approach to investigate banksf optimal strategies. Our model reveals that the bank with the larger loan amount, namely,...

Many economic problems can be formulated as dynamic games in which strategically interacting agents choose actions that determine the current and future levels of a single capital stock. We study necessary conditions that allow us to characterize Markov perfect Nash equilibria (MPNE) for these...

The power-to-take game is a simple two player game where players are randomly divided into pairs consisting of a take authority and responder. Both players in each pair have earned an income in an individual real effort decision-making experiment preceding the take game. The game consists of two...

In stochastic and competitive environments, investors face an investment dilemma because the environments provide conflicting incentives. Empirical research reports various behaviors exhibited by investors, including voluntary concurrent investments, which are called bandwagon investments....

We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for...

We present a duopoly model of strategic capital accumulation in continuous time with uncertainty, such that investment takes the form of singular control. Spot competition is of Cournot type. For this model there exists a parameterized and Pareto-rankable family of Markov perfect equiblibria in...

In this study, we analyze the investment-timing problem and introduce a model of two firms competing for investment preemption, each of which knows in advance the time at which the economic condition that will have an impact on the investment changes. We qualitatively show how two firms...