Anmerkungen:
In: Journal of Economic Dynamics and Control, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 23, 2019 erstellt
Beschreibung:
This paper utilizes a real options and game-theoretic approach to consider the strategic real investment in a duopoly market under uncertainty with time-inconsistent preferences resulting from quasi-hyperbolic discounting. We show that the time-consistent agent becomes the leader when s/he interacts with a time-inconsistent rival. If the rival's time inconsistency is very significant, the leader will optimally behave as if competition did not exist. If the two rivals have about the same time preferences, the leader will accelerate investment and her/his investment threshold will accord with the rival's preemptive one, which is higher than that determined in the classical time-consistent model. The inefficiency of investment from preemptive competition is mitigated and even eliminated if the heterogeneity among agents is sufficiently high. Our model provides a behavioral explanation for the empirical fact that preemption occurs in some markets but is not present in others