2004 Fiscal Year Final Research Report Summary
Real Option Analysis with the Strategic Thinking -Risk Management under Competition-
| Project/Area Number |
14580482
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
社会システム工学
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| Research Institution | Iwate Prefectural University |
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Principal Investigator |
FURUKAWA Koichi Iwate Prefectural University(IPU), Faculty of Policy Studies, Professor, 総合政策学部, 教授 (20016455)
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| Co-Investigator(Kenkyū-buntansha) |
WATANABE Takahiro Tokyo Metropolitan University, Faculty of Urban Liberal Arts, Professor, 都市教養学部, 教授 (70220895)
IMAI Juiuchi Tohoku University, Graduate School of Economics and Management, Associate Professor, 大学院・経済学研究科, 助教授 (10293078)
KOIDA Nobuo Iwate Prefectural University, Faculty of Policy Studies, Lecturer, 総合政策学部, 講師 (30363724)
FURUKAWA Koichi Iwate Prefectural University, Faculty of Policy Studies, Professor (20016455)
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| Project Period (FY) |
2002 – 2004
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| Keywords | risk management / real option / game theory / project valuation / optimal investment strategy |
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| Research Abstract |
The purpose of the research was to develop a model to evaluate firms' project value under uncertainty and competition. This can by done by combining the real option approach which has been recently incorporated in the area of the corporate finance, with game theory. In addition the research attempted to develop a practicable model that can be used for calculating actual project values in the corporation.
As the first step of the research we have developed a two-firms, two-stage investment model under the demand uncertainty and analyzed the project values and the equilibrium strategies for both firms. We show that any equilibrium strategies can be characterized by their investment cost. With respect to the timing of the decision both the simultaneous and the sequential decisions have been investigated. The main results are summarized into the following two papers, respectively.
1. "Real option combined with game theory - Analysis of a two-stage investment game-
2. "A Two-stage Investment Game in Real Option Analysis"
These researches clearly indicate a new situation, which is called flexibility trap, where no research has been pointed out. The emergence of this situation results from the combination of the two different theories. These papers have been submitted and we are waiting for referees' report.
As the second step of the research we have started to develop the multi-stage model for a practical use in the actual business. The preliminary results was written in
3. A Multi-stage Investment Game in Real Option Analysis as a working paper.
We are currently working on the comparison with the corresponding continuous-time model, a sensitivity analysis, an analysis of the equilibrium strategies and the optimal values. We also consider the implementation of the software to support competitive firms' decisions.
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