Strategic capital budgeting: Asset replacement under market uncertainty

OR Spectrum

Volumn 25, Issue 4, 2003, Pages 443-479

  Pawlina, Grzegorz ^a   Kort, Peter M ^b,c  

^a LANCASTER UNIVERSITY   (United Kingdom)

^b TILBURG UNIVERSITY   (Netherlands)

^c UNIVERSITY OF ANTWERP   (Belgium)

Author keywords

Capital budgeting; Cournot duopoly; First passage time; Product market uncertainty; Real options

Indexed keywords

EID: 1442329682     PISSN: 01716468     EISSN: 14366304     Source Type: Journal    
DOI: 10.1007/s00291-003-0137-3     Document Type: Article

References (37)

1. Bodie Z, Kane A, Marcus AJ (2002) Investments, 5th edn. McGraw-Hill Irwin, New York
2. Boyer M, Lasserre P, Mariotti T, Moreaux M (2002) Real options, preemption, and the dynamics of industry investments. Working Paper, CIRANO, and University of Toulouse
3. Bower JL (1986) Managing the resource allocation process. Harvard Business School Classics, Cambridge, MA
4. Bulan LT (2001) Real options, irreversible investment, and firm uncertainty. Working Paper, Brandeis University
5. Caballero RJ, Pindyck RS (1996) Uncertainty, investment and industry evolution. International Economic Review 37: 641-662
6. Dixit A (1993) The art of smooth pasting. In: Fundamentals of Pure and Applied Economics, Vol. 55. Harwood Academic Publishers, New York
7. Dixit A, Pindyck RS (1995) The options approach to capital investment. Harvard Business Review 73: 105-118
8. Dixit A, Pindyck RS (1996) Investment under Uncertainty, 2nd edn. Princeton University Press, Princeton, NJ
9. Fama EF, French KR (2001) Disappearing dividends: changing firm characteristics or lower propensity to pay? Journal of Financial Economics 60: 3-43
10. Fudenberg D, Tirole J (1985) Preemption and rent equalization in the adoption of new technology. Review of Economic Studies 52: 383-401
11. Grenadier SR (1996) The strategic exercise of options: Development cascades and over-building in real estate markets. Journal of Finance 51: 1653-1679
12. Harrison MJ (1985) Brownian motion and stochastic flow systems. Wiley, New York
13. Harsanyi JC (1973) Games with randomly distributed payoffs: A new rationale for mixed strategy equilibrium points. International Journal of Game Theory 2: 1-13
14. Holland AS, Ott SH, Riddiough TJ (2000) The role of uncertainty in investment: An examination of competing investment models using commercial real estate data. Real Estate Economics 28: 33-64
15. Hoppe H, Lehmann-Grube U (2001) Second-mover advantages in dynamic quality competition. Journal of Economics and Management Strategy 10: 419-433
16. Huisman KJM, Kort PM (1999) Effects of strategic interactions on the option value of waiting. CentER DP 9982, Tilburg University
17. Kaplan RS, Atkinson AA (1998) Advanced management accounting, 3rd edn. Prentice Hall, Upper Saddle River, NJ
18. Kester WC (1984) Today's options for tomorrow's growth. Harvard Business Review 62: 105-118
19. Kulatilaka N, Perotti EC (1998) Strategic growth options. Management Science 44: 1021-1031
20. McDonald R, Siegel DR (1986) The value of waiting to invest. Quarterly Journal of Economics 101: 707-728
21. Milgrom P, Weber R (1986) Distributional strategies for games with incomplete information. Mathematics of Operations Research 10: 619-631
22. Myers SC (1987) Finance theory and financial strategy. Midland Corporate Finance Journal 5: 6-13
23. Paddock JL, Siegel DR, Smith JL (1988) Option valuation of claims on real assets: The case of offshore petroleum leases. Quarterly Journal of Economics 103: 755-784
24. Pawlina G, Kort PM (2002) Real options in an asymmetric duopoly: Who benefits from your competitive disadvantage? Working Paper (updated version of CentER DP 2001-95), Tilburg University
25. Pennings E (2002) Optimal pricing and quality choice when investment in quality is irreversible. Working Paper, IGIER - Bocconi University
26. Perotti EC, Rossetto S (2000) Internet portals as portfolios of entry options. Working Paper, University of Amsterdam
27. Quigg L (1993) Empirical testing of real option pricing models. Journal of Finance 44: 1115-1153
28. Reinganum JF (1981) On the diffusion of new technology: A game theoretic approach. Review of Economic Studies 48: 395-405
29. Sarkar S (2000) On the investment-uncertainty relationship in a real options model. Journal of Economic Dynamics and Control 24: 219-225
30. Smets F (1991) Exporting versus FDI: The effect of uncertainty irreversibilities and strategic interactions. Working Paper, Yale University
31. Shapiro C, Varian HR (1998) Information rules. Harvard Business School Press, Cambridge, MA
32. Thijssen JJJ, Huisman KJM, Kort PM (2002) Symmetric equilibrium strategies in game theoretic real option models. CentER DP 2002-81, Tilburg University
33. Torvund PA (1999) Strategic timing behaviour and related game theoretical topics. Ph.D. Thesis, Department of Mathematics, University of Oslo
34. Trigeorgis L (1988) A conceptual options framework for capital budgeting. Advances in Futures and Options Research 3: 145-167
35. Trigeorgis L, Mason SP (1988) Valuing managerial flexibility. Midland Corporate Finance Journal 5: 14-21
36. Tirole J (1988). The theory of industrial organization, MIT Press, Cambridge, MA
37. Zingales L (2000) In search of new foundations. Journal of Finance 55: 1623-1653