Analysis Of Behavioral Game For Options To Invest

The paper use behavioral game to analyse the investment projects including real options, and compare the result with standard game.The research outlay of the paper is first provides a basic model in which only two firms have investment opportunity of the new product development program, the stochastic nature of invention is incorporated, Some new decision flexibilities in model are proposed and the option values of the contingent claims are derived. The situation of investment option holding by both firms is discussed in the paper. Every firm has investing strategy. In the model, the valuation of projects of both firms depends not only on the state of "nature", but also on the rival's strategy. Two firm's investing timing is dynamic by assuming. The paper tries to discuss a methodological problem in handling uncertainty and timing decision that the currency method can't deal with. Both firm's values of the project and investing option are derived. The Stackelberg optimal investing strategies are given out. Use the same method to the simultaneous investment. This is the general standard game method.Now we use two behavioral games to analyse, one case is that players not only focus on their own payoff, but also care about other players'payoff, the other case is that players are overconfident about relative skill. Then compare the result with standard game theory.The final problem of the paper is the equilibrium problems of the option exercise game. By setting the players are two investors, the strategic set is {stopping waiting}, the payoff is the option value of the investment, the paper make the option exercise game analogous to the stopping time game. The research shows that the Markov perfect equilibrium. Then we analyse the Markov perfect equilibrium when overconfidence behavioral game exist, how the result will be changed.