Real option game with intervention of a random partial arbitrator

Adrien Nguyen Huu (1, 2)

1 FiME Lab - Laboratoire de Finance des Marchés d'Energie
2 Department of Mathematics and Statistics

We formalize the randomization procedure undertaken to discriminate players in real option games with Stackelberg leadership advantage. This is done by introducing a random arbitrator with specific parameterizations, and allows to propose a unified treatment of both Cournot and Stackelberg competition in real option games. We extend the study to a partial arbitrator, which leads to competitive advantages in various asymmetrical situations. We fully characterize strategic interactions. We then apply the procedure to risk-neutral and risk-averse firms in a stochastic preemptive real option game in complete market under regulation. The risk-averse case gives us the opportunity to study a new phenomenon we call aversion for confrontation, and its impact on the asymmetrical game.

Mots clés: real option game; timing game; regulator; asymmetry; Stackelberg competition; Cournot competition

Domaines: Gestion des risques [q-fin.RM]; Optimisation et contrôle [math.OC]

Adrien Nguyen Huu. Real option game with intervention of a random partial arbitrator. 2013. ⟨hal-00831263v1⟩