Corporate managers who face both strategic uncertainty and market uncertainty confront a classic trade-off between commitment and flexibility. They can stake a claim by making a large capital investment today, influencing their rivals' behavior; or they can take a "wait and see" approach to...

The incentive to 'overinvest' in capital may be eroded in dynamic, competitive settings if firms face uncertainty and irreversibility. In this paper, we derive the stationary Markov perfect equilibrium for a dynamic, infinite-horizon capacity investment game formulated in continuous time in...

Research contributions providing insights at the intersection of real options analysis and industrial organization have become numerous in the recent decade. In the present paper, we provide an overview aimed at categorizing and relating these research streams. We highlight managerial insights...

The theory of investment and growth of firms has been an important source of stochastic control problems in economics and management science. The issue of optimal management contract under the constraint that a CEO can depart to pursue an outside option ("managerial limited commitment") has been...

Risk-averse entrepreneurs contract with financiers to fund their projects. Projects can be operated under green or dirty technologies. We explore the role of limited commitment in determining the adoption of green technologies when governments enact carbon taxes and/or directed investment...

A renewable energy asset manager can expand the power generation capacity of a particular site by an endogenous amount but may also want to shut down the location to save on fixed operating costs if the market prospects deteriorate. The site manager does not exercise these real options in a set...

Risk-averse entrepreneurs contract with financiers to fund their projects. Projects can be operated under green or dirty technologies. We explore the role of limited commitment in determining the adoption of green technologies when governments enact carbon taxes and/or directed investment...

Ai and Li [2015] introduced a problem at the interface of the neoclassical investment and dynamic contract theories. Specifically, the authors consider the optimal design of a contract that provides sufficient incentives to the management for it to implement the shareholder’s investment plan...