Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms

By Steven R. Grenadier. 2002

618 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b64df95ee4cb9dfe59930b74c72a139008125e5a

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Citations in the corpus

Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings (2010, positive): “In particular, these results validate recent theoretical developments that stress the importance of considering competitive interactions to explain firms’ investment or acquisition policies; see for instance Grenadier (2002), Novy-Marx (2007) or Morellec and Zhdanov (2007).”
Does policy uncertainty affect mergers and acquisitions? (2017, neutral): “Based on the Grenadier (2002) prediction that competition erodes real option values, we hypothesize that the negative effect of policy uncertainty on merger announcements should be stronger in less competitive (more concentrated) industries where the likelihood of competing bids is lower.”
Real Options, Product Market Competition, and Asset Returns (2009, methodology): “This is the base case in Grenadier (2002).”
Land use externalities, open space preservation, and urban sprawl (2004, background): “However, as Grenadier (1996, 2002) has shown, the presence of competition (in this case, among developers competing for the same undeveloped land parcels) erodes the option value and makes the NPV rule a much more accurate representation of decision making.7 Over 100 developers were active in the…”
R&D Investments with Competitive Interactions (2004, background): “Grenadier (1999) and Lambrecht and Perraudin (1999) introduce asymmetric information issues in the competitive exercise of options to invest.”
Supply, Demand and the Value of Green Buildings (2014, background): “Literature on development suggests that competition plays a role in development decisions (see Grenadier, 2002; and Bulan et al., 2009, for the role of competition in influencing commercial real estate investments).”
Valuing the option to invest in an incomplete market (2007, background): “The effects of strategic competition on the value of the option to invest are beyond the scope of this paper, see Grenadier (2002) for an equilibrium model and Smit and Trigeorgis (2004) for an overview and recent developments.”
Product Market Competition and Industry Returns (2017, positive): “After making this assumption and rearranging terms in Equation (2), 8Our argument is consistent with existing models in the literature (e.g., those in Grenadier (2002) and Aguerrevere (2009)).”
Stock Returns in Mergers and Acquisitions (2008, neutral): “…takeover are the outcome of an option exercise game in which each firm determines an exercise strategy for its real option, while taking into account For an electronic copy of this paper, please visit: http://ssrn.com/abstract=886714 the other firm's exercise strategy (see also Grenadier, 2002).”
Product market competition and corporate investment: Evidence from China (2015, neutral): “, Grenadier (2002)”
How Does Corporate Investment Respond to Increased Entry Threat (2015, neutral): “Accordingly, the incumbent is expected to decrease investment in response to higher entry threat, reflecting the erosion of expected investment opportunities generated by a higher threat of rivals’ entry (Grenadier 2002; Aghion et al. 2005).”
Dynamic Models and Structural Estimation in Corporate Finance (2012, background): “…(Décamps, Mariotti, and Villeneuve 2005, 2009; Klein 2009), applications to real estate and leasing (Grenadier 1995), strategic competition (Grenadier 2002), agency cost and information asymmetry (Grenadier and Wang 2005), time-inconsistent preferences (Grenadier and Wang 2007),…”
An Empirical Examination of the Timing of Land Conversions in the Presence of Farmland Preservation Programs (2008, background): “A positive effect is not consistent with conventional real options theory but is consistent with the notion that competition can induce developers to act in periods of both expected price increases and decreases (Grenadier 2002).”
Strategic Capacity Investment Under Uncertainty (2015, neutral): “More recently, Novy-Marx (2007), Back and Paulsen (2009), and Steg (2012) show that the equilibria derived in Grenadier (2002) represent open-loop equilibria.”