Strategic Timing Of Adoption Under Uncertainty: A Game Theoretic Real Options Framework

The defects of traditional net present value theory in the analysis of investment strategy are compensated by introducing the real options theory and method, and the proposal of real option theory with game theory makes it possible for enterprises to evaluate investment projects roundly and precisely, and to make correct investment strategy. Based on foreign and domestic references, the thesis analyses the basic framework of the real option game theory on the combined method of the real options investment strategic analysis and the dynamic timing game theory. Then, the thesis researches on the time when the investments of Duopoly enterprises begin based on the random process and dynamic programming method and gets the threshold of the investment and the market equilibrium.The thesis consists of the following parts:Chapter one, it is mainly introduces the purposes and meanings of the research and briefly indicates the innovation of the paper; at last summarizes the content and structure of the thesis.Chapter two, thoroughly reviews the main literatures in the field of the real option game theory in recent years in foreign and domestic academic research, introduces the basic principles of the real options and the general game analysis of the competition interaction, and combines organically the real option theory and the game theory.In chapter three we can see the investment threshold of the "Leader-Follower" model as well as the option value of each company. Since the Leader firm, which first makes the investment and enters the new-product market before the rival, enjoys the monopolistic cash flow until its rival enters. The value of the Leader's investment option is more valuable than that of the Follower's.Chapter four, based on the results of Chapter three, analyses the game result of non-cooperative duopoly enterprises. The most important part is that I gives the proof which indicates that the value of the real option is more than zero. And at last, we get the final conclusions.The innovation of the paper lies in that based on the main literatures of the field, we assume that if there is more than one firm in the market, no matter when they entered the market, the final equilibrium will be a Cournot equilibrium. Compared to the previous literatures, the assumption of the paper is much nearer to the reality because in the long-run, no firm can obtain the monopoly revenue which is over the Cournot revenue all the time. So we assume that after the second firm entered the market, there will a Cournot equilibrium, say, every firm will produce the Cournot equilibria production. As a result we get a different option value compared to other researchers' results. What's the most important, based on the calculation of Chapter three, we realize that the investment point is at a time when the option value is positive, which is much different from the strategy that the traditional NPV method gives, say, when the Net Present Value is zero, the company should invest immediately.