The impact of operational delay on irreversible investment under Knightian uncertainty

Delaney, Laura

doi:10.1016/j.econlet.2022.110494

Cited by 4 publications

(1 citation statement)

References 21 publications

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“…The aforementioned studies are all based on a certain market environment, focusing on the strategic choice of firms in R&D cooperation, without considering the impact of an uncertain environment. However, R&D investment can be influenced by many uncertain factors, such as political risks [22], Knight uncertainty [23], economic policy uncertainty [24], demand uncertainty [25], market level uncertainty changes [26], and competitor uncertainty. Risk refers to the uncertainty and severity of the consequences of activities that human beings value [27].…”

Section: Literature Reviewmentioning

confidence: 99%

Risk Dominance Analysis of R&D Investment Cooperation in Dynamic Option Game

Liu

Qian

et al. 2022

Sustainability

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Research and development (R&D) investment is very important for firms to gain competitive advantages and sustainable development. Due to the uncertainty of the market and competitors, R&D investment is usually costly and high risk. In such circumstances, firms not only have to figure out the optimal investment timing, but also consider whether to cooperate with competitors to share the risks and costs. In this paper, a two-stage dynamic exchange option game model is proposed for two symmetric competing firms to analyze their R&D investment decision and cooperation. The results show that under uncertainty, the R&D investment timing and cooperation strategy of the two firms depend on the market fluctuation, R&D cost, opportunity benefit of free riding, and the externality of cooperation. If the opportunity benefit of free riding is less than or equal to half of the cooperative research cost, the two firms will invest as early as possible and cooperate. The technology spillover and profits of new products will positively affect the willingness of the competing firms to invest and cooperate in R&D. Moreover, we also calculate the market value thresholds of the investment strategies for the two firms. When the market value is small, the two firms wait for the R&D investment; when the value increases, the firm with a high successful R&D probability will lead the investment, and the other firm follows the investment; when the value is large enough, the two firms will invest at the beginning of the period.

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Section: Literature Reviewmentioning

confidence: 99%

Risk Dominance Analysis of R&D Investment Cooperation in Dynamic Option Game

Liu

Qian

et al. 2022

Sustainability

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Cash holdings, ambiguity aversion, and investment puzzles

Zhao,

Liu,

Pan

2023

Economics Letters

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Dynamic investment strategies for a folk sports tourism destination under uncertain demand

Lv,

Deng,

Deng

2024

RAIRO-Oper. Res.

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More research should shed light on discovering the optimal investment strategy for folk sports tourism destination (FSTD) projects. Therefore, in this paper, we develop a dynamic game model of FSTD considering the dynamic characteristics of FSTD investment, the mode of division of labor and cooperation between public and private operators, and the uncertainty of consumer demand. Public capital is responsible for constructing infrastructures such as venues, and private capital is responsible for services such as catering and accommodation. To promote the development of the FSTD project, the higher-level government subsidizes public investment. Consumer demand for the program is affected by factors such as the size of the two types of capital, the price and quality of services, and demand uncertainty. The study finds that the subsidy leads to an increase in the quantity of public investment and consumption demand, but private sector investment and the prices of both public and private projects are unaffected by the subsidy; the public sector's net return varies in an inverted U-shape with the rate of subsidy, but the private sector's net return rises monotonically. Demand disturbances widen the gap in the net returns of operators between the subsidized and unsubsidized scenarios.

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The impact of operational delay on irreversible investment under Knightian uncertainty

Cited by 4 publications

References 21 publications

Risk Dominance Analysis of R&D Investment Cooperation in Dynamic Option Game

Risk Dominance Analysis of R&D Investment Cooperation in Dynamic Option Game

Cash holdings, ambiguity aversion, and investment puzzles

Dynamic investment strategies for a folk sports tourism destination under uncertain demand

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