R&amp;D COMPETITION IN ALTERNATIVE TECHNOLOGIES : A REAL OPTIONS APPROACH

Nishihara, Michi; Ohyama, Atsuyuki

doi:10.15807/jorsj.51.55

Cited by 11 publications

(11 citation statements)

References 35 publications

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“…Third, in actual business environments, firms compete. We could then consider a two-competing firms problem formulated as a game theoretic real options model, as in Huisman [9] and Nishihara and Ohyama [11]. We leave these topics for future research.…”

Section: Resultsmentioning

confidence: 99%

“…More recently, Bobtcheff and Villeneuve [1] examine the existing technologies choice problem under uncertainty by considering that the input and output prices follow stochastic differential equations. Lastly, Nishihara and Ohyama [11] also investigate the technology choice problem, but by assuming the existence of a rival firm. However, none of this research endogenously obtains the investment cost.…”

Section: Introductionmentioning

confidence: 99%

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Assessing Alternative R&D Investment Projects under Uncertainty

Tsujimura

2013

IJROS

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Abstract:In this paper, we consider two kinds of technologies distinguished by their level of productivity and associated costs, such that one technology increases the quantity of output more than the alternative technology. The firm must then decide in which technology to invest and when to invest in the chosen R&D project so as to maximize profit. To solve this problem, we formulate it as an optimal stopping problem for the firm. Using this analysis, we endogenously obtain the firm's expenditure on R&D investment and numerically locate the R&D investment thresholds for the firm's projects.

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Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Assessing Alternative R&D Investment Projects under Uncertainty

Tsujimura

2013

IJROS

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“…As mentioned in Section 1, the model has a wide range of applications, such as preemption in the new market and M&A struggles. Relevant to this model, [12] investigated a duopoly with two projects following a one-dimensional state variable.…”

Section: Several Firms With Several Alternative Projects 31 Duopoly mentioning

confidence: 99%

Preemptive investment game with alternative projects

Nishihara

2014

Economic Modelling

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This paper derives a preemptive equilibrium in strategic investment in alternative projects. The problem is formulated in a real options model with a multidimensional state variable that represents project-specific uncertainty. The proposed method enables us to evaluate the value of potential alternatives. The results not only extend previous studies with a one-dimensional state variable but also reveal new findings. Preemptive investment takes place earlier and the project value becomes lower if the numbers of both firms and projects increase by the same amount. Interestingly, a strong correlation among profits from projects, unlike in a monopoly, plays a positive role in moderating preemptive competition.JEL Classifications Code: C73, G13, G31.

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“…Nishihara and Ohyama () extended Weeds () to a case involving two alternative technologies, but the model, like Weeds (), does not include either technological uncertainty or a growth opportunity.…”

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confidence: 99%

“…6 As a minor difference, Bar-Ilan and Strange (1998) do not consider profits before completion of the second stage. They consider duration of the second stage investment, but it is not essential because there is no investment after completion of the second stage.7 Nishihara and Ohyama (2008) extendedWeeds (2002) to a case involving two alternative technologies, but the model, likeWeeds (2002), does not include either technological uncertainty or a growth opportunity.8 Lambrecht and Perraudin (2003) andNishihara and Fukushima (2008) revealed the effects of incomplete information, but their models include neither technological uncertainty nor growth opportunity. 9 Note that ∂β/∂σ < 0 in (5).…”

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Valuation of R&D investment under technological, market, and rival preemption uncertainty

Nishihara

2017

Manage Decis Econ

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We develop a real options model for evaluating and optimizing a research and development (R&D) project. The model captures key features of R&D, including research duration, growth opportunity, debt financing, and uncertainty of technology, demand market, and rival preemption. In the model, we unveil the interactions of key R&D features. The effect of duration on investment depends on whether there is rival preemption. Higher uncertainty of research duration speeds up investment in the presence of rival preemption. Higher uncertainty of technological success, combined with a growth opportunity, accelerates investment. Debt financing greatly decreases time lag between the first stage project and growth project.

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R&D COMPETITION IN ALTERNATIVE TECHNOLOGIES : A REAL OPTIONS APPROACH

Abstract: Abstruct We study a problem of R&D competition using a real options approach.We extend the analysis of Weeds [34]

Cited by 11 publications

References 35 publications

Assessing Alternative R&D Investment Projects under Uncertainty

Assessing Alternative R&D Investment Projects under Uncertainty

Preemptive investment game with alternative projects

Valuation of R&D investment under technological, market, and rival preemption uncertainty

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