Thijssen, J.J.J., Huisman, K.J.M. and Kort, P.M. (2006) The effects of information on strategic investment and welfare. Economic Theory, 28 (2). pp. 399-424. ISSN 1432-0479
The paper analyses the influence of uncertainty and competition on the strategic considerations of a firm’s investment decision, where the firm receives imperfect signals about the profitability of an investment project. We find a preemptive or an attrition equilibrium depending on a trade-off between first and second mover advantages. We show that welfare can be negatively affected by decreasing uncertainty, i.e. more and/or better information. Furthermore, simulations indicate that duopoly leads to higher welfare than monopoly if there are few and relatively non-informative signals, whereas the opposite holds if there are many and relatively informative signals.
|Institution:||The University of York|
|Academic Units:||The University of York > Mathematics (York)|
|Depositing User:||York RAE Import|
|Date Deposited:||05 Jun 2009 14:23|
|Last Modified:||05 Jun 2009 14:23|