2006 Fiscal Year Final Research Report Summary
Managing Regional Economic Risks due to the Entry and Exit of Global Firms
| Project/Area Number |
17360243
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| Research Category |
Grant-in-Aid for Scientific Research (B)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
交通工学・国土計画
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| Research Institution | Tohoku University |
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Principal Investigator |
AKAMATSU Takashi Tohoku University, Graduate School of Information Sciences, Professor, 大学院情報科学研究科, 教授 (90262964)
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| Co-Investigator(Kenkyū-buntansha) |
FUKUYAMA Kei Tohoku University, Graduate School of Information Sciences, Associate Professor, 大学院情報科学研究科, 助教授 (30273882)
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| Project Period (FY) |
2005 – 2006
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| Keywords | Real Option / Option Game / Spatial Competition / Location Choice / Oligopoly / Economic Uncertainty / Entry and Exit / Global Economy |
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| Research Abstract |
This study presents a theory that the entry and exit behavior of global firms to/from a local city amplifies global economic risks to a regional economy. The theory employs the dynamic option game framework for capturing landwoner's starategic behaviors against the entry/exit of a global firm to a local city. The analysis reveals that the landlord's equilibrium strategy is to permit the firm's entry immediately when the volatility of the economic factor is sufficiently small, and that in the equilibrium under the firm's free exit rule, the landlord raises the rent as the volatility increases to cover the decrease in his expected revenue due to the increase in the risk of firm's exit. Comparing landowner's possible strategies, we further disclose that not endowing the firm with the exit option is the Pareto dominant strategy in the sense that the firm as well as the landowner are better off.
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Research Products
(12 results)
