We analyze a duopoly where capacity-constrained firms offer an established product and have the option to offer an additional new and differentiated product. We show that the firm with the smaller capacity on the established market has a higher incentive to innovate and reaches a larger market...

We analyze the optimal investment strategy of a firm that can complete a project either in one stage at a single freely chosen time point or in incremental steps at distinct time points. The presence of economies of scale gives rise to the following trade-off: lumpy investment has a lower total...

"This paper analyzes the impact of investment cost asymmetry on the optimal real option exercise strategies and the value of firms in duopoly. Both firms have an opportunity to invest in a project enhancing (<roman>ceteris paribus</roman>) the profit flow. We show that three types of equilibrium strategies...