Project selection: Commitment and competition
Atal, Vidya; Bar, Talia; Gordon, Sidartha (2016), Project selection: Commitment and competition, Games and Economic Behavior, 96, p. 30-48. 10.1016/j.geb.2016.01.011
Type
Article accepté pour publication ou publiéDate
2016Journal name
Games and Economic BehaviorVolume
96Publisher
Academic Press
Pages
30-48
Publication identifier
Metadata
Show full item recordAbstract (EN)
We examine project selection decisions of firms constrained in the number of projects they can handle at once. A new project opportunity arises every period. Taking on a project requires a commitment of uncertain duration, preventing the firm from selecting another project in subsequent periods until the commitment ends. In our dynamic game, when two firms are free of commitment, they move sequentially in random order. Symmetric pure strategy Markov perfect equilibria always exist. In equilibrium, the first mover strategically rejects some projects that are then selected by the second mover, even when the value of the project is the same for both firms. A monopolist rejects more projects, and adopts ones of higher average quality compared to the duopolist. Duopolists select too few projects compared to their jointly optimal behavior. We extend the model to allow for externalities, asymmetry, and n>2n>2 firms.Subjects / Keywords
Project selection; Search; Commitment; Markov perfect equilibriumRelated items
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