Download e-book for kindle: Technology Investment: A Game Theoretic Real Options by Kuno J.M. Huisman

By Kuno J.M. Huisman

ISBN-10: 1441949119

ISBN-13: 9781441949110

ISBN-10: 1475734239

ISBN-13: 9781475734232

This bankruptcy is equipped as follows. the commercial challenge on which this publication focuses is influenced in part 1. the 2 instruments used to check this financial challenge, that are genuine concepts thought and online game idea, are mentioned in Sections 2 and three, respectively. part four surveys the contents of this ebook. In part five a few promising extensions of the learn offered during this ebook are indexed. 1. expertise funding funding charges of businesses govern financial development. Es­ pecially investments in new and extra effective applied sciences are an impor­ tant determinant. particularly, within the final twenty years an expanding a part of the funding costs matters investments in informa­ tion and communique know-how. Kriebel, 1989 notes that (already) in 1989 approximately 50 percentage of latest company capital charges through significant usa businesses was once in info and communique know-how. because of the swift development in those applied sciences, the tech­ nology funding selection of the person company has develop into a really advanced subject. to illustrate of the very excessive velocity of technological development ponder the marketplace for own pcs. IBM intro­ duced its Pentium own desktops within the early Nineties on the similar rate at which it brought its 80286 own desktops within the Nineteen Eighties. as a result it took below a decade to enhance at the order of twenty occasions when it comes to either velocity and reminiscence capacities, with no expanding the associated fee (Yorukoglu, 1998).

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Extra resources for Technology Investment: A Game Theoretic Real Options Approach

Sample text

N - 1}. Of course, after each technology adoption we know the exact value of that (i and we update the new approximations. 2 can be used to make a prediction about the efficiencies of the technologies that the firm should adopt in case the jump size is stochastic. However after each technology arrival these predictions must be corrected. , 1998 (see also Doraszelski, 2001). e. 0i + u < 0iH , it holds that (cf. 49) gives = 7r (On _ I. e. 51). , 1998. 51) resembles the value of the option to invest.

Therefore A is added to the discount rate. The last part is the discounted value of the firm after the technology switch. 3 in Appendix D of Chapter 2. Expressions for Bi and the critical level It can be derived by considering the case that the investment cost decreases smoothly through the critical level. Then the value matching and smooth pasting conditions must hold at the critical lrvet. e. 1.. Ii (15,6;) < Ii ::; liD } , we know that the firm is not going to switch after the next jump of the investment cost.

58} is again a decreasing function. A higher x (t) shifts the probability distribution cP uniformly to the right and therefore the expected value decreases. Thus G is decreasing in x (t) which implies that, given that there exists a threshold x*, this 0 threshold is unique. 4 does not guarantee the existence of a threshold, but if we can derive a threshold and the conditions are satisfied this threshold is unique. 4 provides sufficiency conditions which are by no means necessary. 4 for two specific cases.

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Technology Investment: A Game Theoretic Real Options Approach by Kuno J.M. Huisman

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