Competitive Strategy: Options and Games
PublisherThe MIT Press
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Corporate managers who face both strategic uncertainty and market uncertainty confront a classic trade-off between commitment and flexibility. They can stake a claim by making a large capital investment today, influencing their rivals’ behavioror they can take a “wait and see” approach to avoid adverse market consequences tomorrow. This book describes an emerging paradigm that can quantify and balance commitment and flexibility—“option games” by which the decision-making approaches of real options and game theory can be combined. The book first discusses prerequisite concepts and tools from basic game theory, industrial organization, and real options analysis, bringing important materials and ideas together into a unified framework. It then presents the new approach in discrete time and later in continuous time, beginning with the building blocks of the basic ideas and tools and culminating in richer theoretical analyses.