2003, 2003(Special): 945-950. doi: 10.3934/proc.2003.2003.945

Valuing investment project in competitive environment


Dept. of Mathematics, Huazhong University of Science and Technology, Wuhan(430074), Hubei, China, China

Received  August 2002 Revised  April 2003 Published  April 2003

This paper provides a model of investment project in a dynamic competitive environment and values the system. The option value of the investment is modelled as a solution of a stochastic differential equation with free boundary through a combination of real option approach as well as dynamic investing analysis. The optimal investment rule is the free boundary of the equation, $p$*, such that the firm invests at once when $p \>= p$* and waits when $p < p$*. The result shows how uncertainty in project and competitive pressure of a rival affect the value of the project and firm’s investment behavior. The results imply that the investment option value of following investor will be valueless when the research effort intensity of the leader investor is larger enough. The results demonstrate that the model can be applied as an extension from those discussing value of real options for a non -competitive environment.
Citation: Ming Yang, Chulin Li. Valuing investment project in competitive environment. Conference Publications, 2003, 2003 (Special) : 945-950. doi: 10.3934/proc.2003.2003.945

Chonghu Guan, Xun Li, Rui Zhou, Wenxin Zhou. Free boundary problem for an optimal investment problem with a borrowing constraint. Journal of Industrial and Management Optimization, 2022, 18 (3) : 1915-1934. doi: 10.3934/jimo.2021049


Hantaek Bae. Solvability of the free boundary value problem of the Navier-Stokes equations. Discrete and Continuous Dynamical Systems, 2011, 29 (3) : 769-801. doi: 10.3934/dcds.2011.29.769


Sunghan Kim, Ki-Ahm Lee, Henrik Shahgholian. Homogenization of the boundary value for the Dirichlet problem. Discrete and Continuous Dynamical Systems, 2019, 39 (12) : 6843-6864. doi: 10.3934/dcds.2019234


Toyohiko Aiki. A free boundary problem for an elastic material. Conference Publications, 2007, 2007 (Special) : 10-17. doi: 10.3934/proc.2007.2007.10


Yang Zhang. A free boundary problem of the cancer invasion. Discrete and Continuous Dynamical Systems - B, 2022, 27 (3) : 1323-1343. doi: 10.3934/dcdsb.2021092


Hayk Mikayelyan, Henrik Shahgholian. Convexity of the free boundary for an exterior free boundary problem involving the perimeter. Communications on Pure and Applied Analysis, 2013, 12 (3) : 1431-1443. doi: 10.3934/cpaa.2013.12.1431


Rafał Kamocki, Marek Majewski. On the continuous dependence of solutions to a fractional Dirichlet problem. The case of saddle points. Discrete and Continuous Dynamical Systems - B, 2014, 19 (8) : 2557-2568. doi: 10.3934/dcdsb.2014.19.2557


Vladimir V. Varlamov. On the initial boundary value problem for the damped Boussinesq equation. Discrete and Continuous Dynamical Systems, 1998, 4 (3) : 431-444. doi: 10.3934/dcds.1998.4.431


Mauro Garavello. Boundary value problem for a phase transition model. Networks and Heterogeneous Media, 2016, 11 (1) : 89-105. doi: 10.3934/nhm.2016.11.89


Patricio Cerda, Leonelo Iturriaga, Sebastián Lorca, Pedro Ubilla. Positive radial solutions of a nonlinear boundary value problem. Communications on Pure and Applied Analysis, 2018, 17 (5) : 1765-1783. doi: 10.3934/cpaa.2018084


Marta García-Huidobro, Raul Manásevich. A three point boundary value problem containing the operator. Conference Publications, 2003, 2003 (Special) : 313-319. doi: 10.3934/proc.2003.2003.313


Gen Nakamura, Michiyuki Watanabe. An inverse boundary value problem for a nonlinear wave equation. Inverse Problems and Imaging, 2008, 2 (1) : 121-131. doi: 10.3934/ipi.2008.2.121


Xiaoshan Chen, Fahuai Yi. Free boundary problem of Barenblatt equation in stochastic control. Discrete and Continuous Dynamical Systems - B, 2016, 21 (5) : 1421-1434. doi: 10.3934/dcdsb.2016003


Naoki Sato, Toyohiko Aiki, Yusuke Murase, Ken Shirakawa. A one dimensional free boundary problem for adsorption phenomena. Networks and Heterogeneous Media, 2014, 9 (4) : 655-668. doi: 10.3934/nhm.2014.9.655


Yongzhi Xu. A free boundary problem model of ductal carcinoma in situ. Discrete and Continuous Dynamical Systems - B, 2004, 4 (1) : 337-348. doi: 10.3934/dcdsb.2004.4.337


Anna Lisa Amadori. Contour enhancement via a singular free boundary problem. Conference Publications, 2007, 2007 (Special) : 44-53. doi: 10.3934/proc.2007.2007.44


Shihe Xu. Analysis of a delayed free boundary problem for tumor growth. Discrete and Continuous Dynamical Systems - B, 2011, 15 (1) : 293-308. doi: 10.3934/dcdsb.2011.15.293


Nan Li, Song Wang. Pricing options on investment project expansions under commodity price uncertainty. Journal of Industrial and Management Optimization, 2019, 15 (1) : 261-273. doi: 10.3934/jimo.2018042


Christina A. Hollon, Jeffrey T. Neugebauer. Positive solutions of a fractional boundary value problem with a fractional derivative boundary condition. Conference Publications, 2015, 2015 (special) : 615-620. doi: 10.3934/proc.2015.0615


Hiroshi Matsuzawa. A free boundary problem for the Fisher-KPP equation with a given moving boundary. Communications on Pure and Applied Analysis, 2018, 17 (5) : 1821-1852. doi: 10.3934/cpaa.2018087

 Impact Factor: 


  • PDF downloads (38)
  • HTML views (0)
  • Cited by (0)

Other articles
by authors

[Back to Top]