Abstract:This paper derives a preemptive equilibrium in strategic investment in alternative projects. The problem is formulated in a real options model with a multidimensional state variable that represents project-specific uncertainty. The proposed method enables us to evaluate the value of potential alternatives. The results not only extend previous studies with a one-dimensional state variable but also reveal new findings. Preemptive investment takes place earlier and the project value becomes lower if the numbers o… Show more
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