Real options bargaining games

Real options bargaining games

Blog Article

The real options approach has been supporting investment decision-making processes for years.However, on competitive markets, the real options games approach is the more suitable way.In this article, a real options game subject to analysis is MYRRH GUM the situation in which two companies with different market share are exploring an opportunity to implement a new investment project.

It is known that competition on the market reduces the scope of benefits a company can gain whilst implementing the project.In this paper, we show that this reduction can be mitigated by taking into account payoff transfer designated as a bargaining solution.We discuss three main types of games between companies that we can observe on the market; then we analyze their bargaining solutions, and finally—come up with recommendations to companies.

A firm that dominates its respective market usually benefits by implementing the most advantageous strategy, but in certain situations it should pay special W Bags attention to its weaker competitor’s opportunities and try to anticipate its movements.In the paper, we show that with high project risk and significant asymmetry in the firms’ market share, a weaker company may still hold all the cards.