Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5069597 | Finance Research Letters | 2014 | 11 Pages |
Abstract
This paper examines the effect of uncertainty on investment timing in a game theoretic real option model. We extend the settings of the related recent literature on investment timing under uncertainty by a more general assumption, i.e. the investment is also influenced by the actions of a second player. The results show that a U-shaped investment-uncertainty relationship generally sustains even for infinite-lived investment projects and proper defined cash flows. However, timing of an investment occurs inefficiently late. Moreover, we show that the influence of uncertainty on the associated first-mover advantage becomes ambiguous, too.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Elmar Lukas, Andreas Welling,