This paper considers a representative firm taking investment decisions in a high-tech environment where different generations of products are invented over time. First, we develop a real options investment model in which, according to standard practice, the sales price and the unit production...

This paper studies investments in new markets where more than two (anticipated) identical competitors are present. In case of three firms an accordion effect is detected: an exogenous demand shock results in a change of the wedge between investment thresholds of the first and second investor...

This paper considers a firm's investment decision determining the timing and capacity level in a dynamic setting with demand uncertainty. Its investment is financed by borrowing from a lender that has market power, generating a capital market inefficiency. We show that the firms's investment is...

This paper generalizes the theory of irreversible investment under uncertainty by allowing for risk averse investors in the absence of complete markets. Until now, this theory has only been developed in the cases of risk neutrality or risk aversion in combination with complete markets. Within a...

As becomes apparent from the standard text books in industrial organization (cf. Tirole, 1988, The Theory of Industrial Organization), the analysis of the effects of uncertainty within this field is yet underdeveloped. This paper shows that the new theory of strategic real options can be used to...

This paper generalizes the theory of irreversible investment under uncertainty by allowing for risk averse investors in the absence of complete markets. Until now this theory has only been developed in the cases of risk neutrality, or risk aversion in combination with complete markets. We...

This paper considers investment problems in real options with non-homogeneous two-factor uncertainty. It shows that, despite claims made in the literature, the method used to derive an analytical solution in one dimensional problems cannot be straightforwardly extended to problems with two...

Rapid technological developments are inducing the shift in consumer demand from existing products towards new alternatives. When operating in a declining market, the profitability of incumbent firms is largely dependent on the ability to correctly time the introduction of product innovations....

This paper examines a dynamic incumbent-entrant framework with stochastic evolution of the (inverse) demand, in which both the optimal timing of the investments and the capacity choices are explicitly considered. We find that the incumbent invests earlier than the entrant and that entry...

In case of a product innovation firms start producing a new product. While doing so, such a firm should decide what to do with its existing product after the firm has innovated. Essentially it can choose between replacing the established product by the new one, or keep on producing the...