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Optimal Amount and Timing of Investment in a Stochastic Dynamic Cournot Competition

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DOI: 10.4236/tel.2016.61001    4,136 Downloads   4,484 Views Citations
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ABSTRACT

By making use of the optimal stopping theory, we construct a multi-stage stochastic Cournot model to examine the effect of increase in uncertainty and number of entrants on the amount and timing of strategic cost reduction investment. It is revealed that firms should enlarge and postpone the investment if 1) the market is more uncertain, or 2) there exist more firms in the market.

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Fujita, Y. (2016) Optimal Amount and Timing of Investment in a Stochastic Dynamic Cournot Competition. Theoretical Economics Letters, 6, 1-6. doi: 10.4236/tel.2016.61001.

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