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 … industry investment occurs earlier than socially optimal and the first entrant takes more risk than socially optimal. While …

We study the development of a duopoly in a continuous-time model of capacity investment under no commitment by firms … both firms hold capacity, tacit collusion, taking the form of postponed capacity investment, may occur as a MPE. Volatility … investment real options in that context. In the early industry development phase, the sole Markov Perfect Equilibrium (MPE) is a …

, tacit collusion, taking the form of postponed capacity investment, may occur in Markov Perfect Equilibrium. Volatility and …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 …

We model capacity-building investments in a homogeneous product duopoly facing uncertain demand growth. Capacity … Equilibrium (MPE) paths of the investment game, which may include episodes during which firms invest at different times, a … preemption pattern, and episodes in which firms invest simultaneously, a tacit collusion pattern. These episodes may alternate …

In a real option model, we show that the standard analysis of vertical relationships transposes directly to investment … with a discrete input to serve a growing but incertain demand, and if the supplier has market power, investment occurs too … volatility increases the effective investment cost and results in lower value for both firms. Vertical restraints can restore …

. Optimal cooperation involves either monopoly or duopoly investment, the latter being either symmetric or asymmetric. Finally … (cooperation) solutions, in a model of investment timing allowing for externalities in both flow pro…ts and investment costs. For … two ex-ante symmetric …rms, either preemption or attrition occur depending on the size of the investment externality …

. It also increases the distance between the firmsí respective investment triggers. The specifications and results are …

We study a simple duopoly model of preemption with multiple investments and instantaneous Bertrand competition on a … these conditions do not hold, the equilibrium investment timing is suboptimal, and the firms' long-run capacities may depend …

We model capacity-building investments in a homogeneous product duopoly facing uncertain demand growth. Capacity … Equilibrium (MPE) paths of the investment game, which may include episodes during which firms invest at different times, a … preemption pattern, and episodes in which firms invest simultaneously, a tacit collusion pattern. These episodes may alternate …

We build on Mason and Weeds’ (2010) model of duopoly investment under uncertainty by allowing high initial values of … simultaneous investment. In contrast with previous models where these have been interpreted as “mistakes”, such simultaneous … investment outcomes can be optimal for the industry. Clustering of investments is thus both more likely, and more likely to be a …