Developing Real Option Game Models
Posted: 22 May 2013 Last revised: 9 Feb 2014
Date Written: May 21, 2013
By mixing concepts from both game theoretic analysis and real options theory, an investment decision in a competitive market can be seen as a "game" between firms, as firms implicitly take into account other firms’ reactions to their own investment actions. We review two decades of real option game models, suggesting which critical problems have been "solved" by considering game theory, and which significant problems have not been yet adequately addressed. We provide some insights on the plausible empirical applications, or shortfalls in applications to date, and suggest some promising avenues for future research.
Keywords: Finance, Real Options Games, Investment Analysis, Strategic Investment
JEL Classification: D81, D92, O33
Suggested Citation: Suggested Citation