Arbeitspapier

Irreversible investment in oligopoly

We offer a new perspective on games of irreversible investment under uncertainty in continuous time. The basis is a particular approach to solve the involved stochastic optimal control problems which allows to establish existence and uniqueness of an oligopolistic open loop equilibrium in a very general framework without reliance on any Markovian property. It simultaneously induces quite natural economic interpretation and predictions by its characterization of optimal strategies through first order conditions. The construction of equilibrium policies is then enabled by a stochastic representation theorem. A stepwise specification of the general model leads to further economic conclusions. We obtain explicit solutions for Lévy processes.

Language
Englisch

Bibliographic citation
Series: Working Papers ; No. 415

Classification
Wirtschaft
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Subject
Irreversible investment
Stochastic game
Oligopoly
Real options
Equilibrium
Irreversibility of Investment
Stochastisches Spiel
Realoption
Kontrolltheorie
Oligopol
Theorie

Event
Geistige Schöpfung
(who)
Steg, Jan-Henrik
Event
Veröffentlichung
(who)
Bielefeld University, Institute of Mathematical Economics (IMW)
(where)
Bielefeld
(when)
2009

Handle
URN
urn:nbn:de:hbz:361-14605
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Steg, Jan-Henrik
  • Bielefeld University, Institute of Mathematical Economics (IMW)

Time of origin

  • 2009

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