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Preemptive competition between two firms with different discount rates
Author(s) -
Nishihara Michi
Publication year - 2021
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3264
Subject(s) - duopoly , economics , disadvantage , microeconomics , volatility (finance) , first mover advantage , order (exchange) , competition (biology) , investment (military) , monetary economics , cournot competition , industrial organization , econometrics , finance , ecology , politics , political science , law , biology
I study a real options duopoly game between two firms with different discount rates. I derive the order of investments, investment thresholds, and firm values in equilibrium. With no cost disadvantage, the patient firm enters the market earlier and earns more than the impatient opponent. When the patient firm has a cost disadvantage, the order of market entry depends on the market characteristics. With a weaker first‐mover advantage, higher volatility, and lower growth rate, the impatient firm is more likely to be the first mover; however, the patient firm can earn more, even though it enters the market later.