The Analytic Methods Of Real Options And Game Theory In The Value Increase Of Failing Firm Through Asset Restructuring

In the course of the development, looked for the existence and the development, firm can not only have the prime competent according to its resources, knowledge and technology, but also take into consideration of its operating circumstanceï¹' Firm operate how to adopt the needs of the outer circumstance, inner competence and the operation aims, and implement its strategic decision, so they realize the aim of the continuous increase .It is a huge challenge for any firm. Those that include the implement the estate and recourses, the administrative ability, and sale tactics, are weak cause for the falling firm. Most importantly, they can not realize the change of the circumstance and reform themselves with the change of the circumstance.A basic part of the firm operation is investment. The traditional investment decision methods, represented by Net Present Value method, ignore the strategic value of creating following growth opportunities and the flexibility to adjust according to the market changes. Real Options Theory regards all kinds of investment opportunities and management flexibility as option and provides a practical qualitative tool. It is a great progress of investment decision theories. Option and Game Theory is the latest development, which combines option pricing theory and game theory to invest scientifically.As a starting point, I introduce the real options theory on the basis of the traditional NPV method and the game theory on the basis of the real options theory of the investment. Then I quote the partial differential equation of the investment chance and the investment timing of the monopoly firm by the dynamic programming and the real options methods and develop the comparative static's analysis. In particular, I use a verse of the investment timimg of the entrance and the exit of the monopoly firm by the real options method.In the present article, I design two models, which combine the real options method with the game method, under the uncertainty and the competition, emphasizingly consider that the falling firm realize the value increase through the asset restructuring. I analyze the effect of the value increase that falling firm exit or accept the merger by the real options and game method, derive the optimal exit timing from this method, and develop the game analysis that the falling firm accept the merger and its opponent use the merger policy. At the same time, under the instantaneous revenue flow decided by...