Competitive Investment Strategies in New Technology Adoption with a Further New Technology Anticipated
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This paper studies a general dynamic duopoly in which two firms compete in the adoption of current technology with a further new technology anticipated. Three kinds of equilibria may occur in technology adoption, namely the preemptive, sequential, and simultaneous equilibrium, depending on the level of operating costs and the first-move advantage. It shows that the faster technological innovation encourages the leader to invest earlier, while induces the follower to invest later. Furthermore, like the investment costs, with the increase of the operating costs, the follower tends to invest later, while the leader tends to invest earlier. However, the investment thresholds are more sensitive to the change of the operating costs than that of the investment costs.
KeywordsOperating costs preemption real options technological uncertainty
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