Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197736 
Year of Publication: 
2017
Series/Report no.: 
ISER Discussion Paper No. 1007
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
We investigate the entry timing and location decisions under market-size uncertainty with Brownian motions in a continuous-time spatial competition duopoly model a la d'Aspremont et al. (1979). Under a sequential equilibrium, the threshold of the follower non-monotonically increases in volatility, which is in stark contrast to the extant results in the real options literature. Also, although the follower's entry timing tends to be late as the volatility becomes amplified, the leader is more likely to increase the degree of product differentiation as the volatility gets higher. Finally, we compare the equilibrium entry decisions with the second-best ones.
Subjects: 
Location
Hotelling model
Continuous-time model
Entry timing
Real options
JEL: 
C73
D81
L11
L13
Document Type: 
Working Paper

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