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

By Kuno J.M. Huisman

This bankruptcy is prepared as follows. the industrial challenge on which this booklet focuses is prompted in part 1. the 2 instruments used to check this financial challenge, that are genuine innovations thought and video game thought, 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 examine awarded during this e-book are indexed. 1. know-how funding funding charges of businesses govern monetary development. Es­ pecially investments in new and extra effective applied sciences are an impor­ tant determinant. specifically, within the final twenty years an expanding a part of the funding bills matters investments in informa­ tion and conversation expertise. Kriebel, 1989 notes that (already) in 1989 approximately 50 percentage of latest company capital bills by way of significant usa businesses was once in info and verbal exchange expertise. as a result swift growth in those applied sciences, the tech­ nology funding choice of the person enterprise has develop into a truly complicated subject. for instance of the very excessive speed of technological development think about the marketplace for own pcs. IBM intro­ duced its Pentium own desktops within the early Nineties on the similar expense at which it brought its 80286 own pcs within the Eighties. as a result it took below a decade to enhance at the order of twenty occasions by way of either velocity and reminiscence capacities, with no expanding the associated fee (Yorukoglu, 1998).

Show description

Read Online or Download Technology Investment: A Game Theoretic Real Options Approach (Theory and Decision Library C) PDF

Similar game theory books

The Arrow Impossibility Theorem (Kenneth J. Arrow Lecture Series)

Kenneth Arrow's pathbreaking "impossibility theorem" was once a watershed within the heritage of welfare economics, vote casting conception, and collective selection, demonstrating that there's no vote casting rule that satisfies the 4 fascinating axioms of decisiveness, consensus, nondictatorship, and independence.

Game Theory (Handbooks in Economics, Volume 4)

The facility to appreciate and expect habit in strategic occasions, within which an individual’s good fortune in making offerings will depend on the alternatives of others, has been the area of online game idea because the Nineteen Fifties. constructing the theories on the middle of online game conception has resulted in 8 Nobel Prizes and insights that researchers in lots of fields proceed to strengthen.

Multifractal Financial Markets: An Alternative Approach to Asset and Risk Management (SpringerBriefs in Finance)

Multifractal monetary Markets ​explores acceptable types for estimating risk and making the most of marketplace swings, permitting readers to advance more desirable portfolio administration skills and thoughts.  Fractals in finance let us comprehend industry instability and patience.  When utilized to monetary markets, those versions produce the needful quantity of knowledge necessary for gauging market probability so that it will mitigate loss.

Ad Hoc Networks Telecommunications and Game Theory (Iste)

Random SALOHA and CSMA protocols which are used to entry MAC in advert hoc networks are very small in comparison to the a number of and spontaneous use of the transmission channel. so that they have low immunity to the issues of packet collisions. certainly, the transmission time is the severe consider the operation of such networks.

Extra info for Technology Investment: A Game Theoretic Real Options Approach (Theory and Decision Library C)

Sample text

E. the ability of making more technology switches, incTeases the firm's value. FurtheT we see that the mOTe switches the fiTm can make, the ea7'lier the first switch is made. 2. Value of the firm and efficiencies of technologies adopted for n E {I, 2, 3, 4, 5} . 1 also holds in case the jump size is stochastic. The only things that change are the functions Fi . In the stochastic jump case the values of (i, i E {1,... ,n - 1}, are not known beforehand. However, to obtain a solution the efficiency parameters of the technologies that arrive in the future must be known.

2 to calculate the expected value oft* : JL oon*-l Pr (N (t) = n) dt = t=o n=O = 1 L":\ n*-l n=O JL OOn*-l n e -At (~; dt t=o n=O Joo An +1t n n! e-Atdt = n* >:. 3). 5). 125) Thus 48 TECHNOLOGY INVESTMENT o Thereby the proposition is proved. 3 J J 00 E [t*] = J 00 (1 - Pr (t* ~ t)) dt = t=O (1 - Pr (0 (t) ~ 0*)) dt t=O 00 = Pr (0 (t) tl ~ tl t. Un < 0') ~ Pr (f. Un < O' - 00 N (t) ~ k) Pr (N (t) ~ k) dt. £ e x (k -1)! k=l x=O J 0*-00 e -~ x=O L 00 A (k _ 1)! ) dt . £kxk-l k dx (At) e- At k! Ak +1t k -At !

The firm has the right but not the obligation to make the investment. At the moment that the firm invests the option is killed and because the option is valuable the firm looses money. Therefore the lost option value Constant Investment Cost 31 should be incorporated in the investment analysis. In the technology investment problem the option to invest is valuable, because with positive probability the firm can buy a better technology for the same amount of money if it waits just a little with making the investment.

Download PDF sample

Rated 4.47 of 5 – based on 4 votes