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http://hdl.handle.net/10419/37484
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| Title: | | Leaders, Followers, and Risk Dynamics in Industry Equilibrium  |
| Authors: | | Carlson, Murray Dockner, Engelbert Fisher, Adlai Giammarino, Ron |
| Issue Date: | | 2010 |
| Series/Report no.: | | Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Dynamic Models of Investment D8-V2 |
| Abstract: | | We study own and rival risk in a dynamic duopoly with a homogeneous output good. A competitor's options to adjust capacity reduce own-firm risk through a simple hedging channel. For example, if a rival possesses a growth option, an increase in industry demand directly enhances current profits but also encourages value-reducing competitor expansion. As a consequence, when a leader and a follower emerge in equilibrium, risk dynamics depart substantially from previously-studied simultaneous move benchmarks. Own-firm and competitor required returns tend to move together through contractions and oppositely during expansions, providing testable new empirical predictions. |
| Subjects: | | Growth options and industry risk asset pricing and investment decisions risk dynamics in oligopolistic industries |
| JEL: | | G31 D43 D92 |
| Document Type: | | Conference Paper |
| Appears in Collections: | | Jahrestagung des Vereins für Socialpolitik 2010 (Kiel): Ökonomie der Familie
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