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Title:Irreversible investment in oligopoly PDF Logo
Authors:Steg, Jan-Henrik
Issue Date:2009
Series/Report no.:Working papers // Institute of Mathematical Economics 415
Abstract: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.
Subjects:Irreversible investment
Stochastic game
Oligopoly
Real options
Equilibrium
JEL:C73
D43
D92
Persistent Identifier of the first edition:urn:nbn:de:hbz:361-14605
Document Type:Working Paper
Appears in Collections:Working Papers, Institute of Mathematical Economics, Universität Bielefeld

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