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Titel
Entry deterrence by timing rather than overinvestment in a strategic real options framework / N.F.D. Huberts, H. Dawid, K.J.M. Huisman, P.M. Kort
VerfasserHuberts, Nick ; Dawid, Herbert ; Huisman, Kuno J. M. ; Kort, Peter M.
ErschienenBielefeld, Germany : Universität Bielefeld, Faculty of Business Administration and Economics, October 2015
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Elektronische Ressource
Umfang1 Online-Ressource (42 Seiten) : Illustrationen
SerieWorking papers in economics and management ; No. 02-2015
URNurn:nbn:de:hbz:6:2-127499 
DOI10.4119/unibi/2901419 
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Entry deterrence by timing rather than overinvestment in a strategic real options framework [0.39 mb]
Zusammenfassung

This paper examines a dynamic incumbent-entrant framework with stochastic evolution of the (inverse) demand, in which both the optimal timing of the investments and the capacity choices are explicitly considered. We find that the incumbent invests earlier than the entrant and that entry deterrence is achieved through timing rather than through overinvestment. This is because the incumbent invests earlier and in a smaller amount compared to a scenario without potential entry. If, on the other hand, the capacity size is exogenously given, the investment order changes and the entrant invests before the incumbent does.

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