We examine contributions to a public good when some donors do not know the true value of the good.If donors in such an environment determine the sequence of moves, two contribution orders may arise as equilibria.Either the uninformed and informed donors contribute simultaneously or the informed contribute prior to the uninformed.Sequential moves result in a larger provision of the public good, because the follower mimics the action of the leader, and in accounting for this response the leader chooses to contribute when it is efficient to do so.An experimental investigation of the game shows that the donors predominantly choose to contribute sequentially, and that the resulting contributions are larger than those of the simultaneous-move game.Although the gain from sequential moves is smaller when the sequence is set exogenously, our results suggest that the involved parties would benefit from having sequential moves imposed upon them.

We examine contributions to a public good when some donors do not know the true value of the good.If donors in such an environment determine the sequence of moves, two contribution orders may arise as equilibria.Either the uninformed and informed donors contribute simultaneously or the informed contribute prior to the uninformed.Sequential moves result in a larger provision of the public good, because the follower mimics the action of the leader, and in accounting for this response the leader chooses to contribute when it is efficient to do so.An experimental investigation of the game shows that the donors predominantly choose to contribute sequentially, and that the resulting contributions are larger than those of the simultaneous-move game.Although the gain from sequential moves is smaller when the sequence is set exogenously, our results suggest that the involved parties would benefit from having sequential moves imposed upon them.

As becomes apparent from the standard text books in industrial organization (cf.Tirole, 1988, The Theory of Industrial Organization), the analysis of the e.ects of uncertainty within this field is yet underdeveloped.This paper shows that the new theory of strategic real options can be used to fill this empty hole .Based on the work by Smets (1991) standard models are identified, and they are analyzed by applying a method involving symmetric mixed strategies.As an illustration, extensions regarding asymmetry, technology adoption and decreasing uncertainty over time are reviewed.Among others, it is found that the value of a high cost firm can increase in its own cost.Furthermore, it is established to what extent investments are delayed when technologial progress is anticipated, and it is found that competition can be bad for welfare.

We examine contributions to a public good when some donors do not know the true value of the good.If donors in such an environment determine the sequence of moves, two contribution orders may arise as equilibria.Either the uninformed and informed donors contribute simultaneously or the informed contribute prior to the uninformed.Sequential moves result in a larger provision of the public good, because the follower mimics the action of the leader, and in accounting for this response the leader chooses to contribute when it is efficient to do so.An experimental investigation of the game shows that the donors predominantly choose to contribute sequentially, and that the resulting contributions are larger than those of the simultaneous-move game.Although the gain from sequential moves is smaller when the sequence is set exogenously, our results suggest that the involved parties would benefit from having sequential moves imposed upon them.

As becomes apparent from the standard text books in industrial organization (cf.Tirole, 1988, The Theory of Industrial Organization), the analysis of the e.ects of uncertainty within this field is yet underdeveloped.This paper shows that the new theory of strategic real options can be used to fill this empty hole .Based on the work by Smets (1991) standard models are identified, and they are analyzed by applying a method involving symmetric mixed strategies.As an illustration, extensions regarding asymmetry, technology adoption and decreasing uncertainty over time are reviewed.Among others, it is found that the value of a high cost firm can increase in its own cost.Furthermore, it is established to what extent investments are delayed when technologial progress is anticipated, and it is found that competition can be bad for welfare.

We examine contributions to a public good when some donors do not know the true value of the good.If donors in such an environment determine the sequence of moves, two contribution orders may arise as equilibria.Either the uninformed and informed donors contribute simultaneously or the informed contribute prior to the uninformed.Sequential moves result in a larger provision of the public good, because the follower mimics the action of the leader, and in accounting for this response the leader chooses to contribute when it is efficient to do so.An experimental investigation of the game shows that the donors predominantly choose to contribute sequentially, and that the resulting contributions are larger than those of the simultaneous-move game.Although the gain from sequential moves is smaller when the sequence is set exogenously, our results suggest that the involved parties would benefit from having sequential moves imposed upon them.

As becomes apparent from the standard text books in industrial organization (cf.Tirole, 1988, The Theory of Industrial Organization), the analysis of the e.ects of uncertainty within this field is yet underdeveloped.This paper shows that the new theory of strategic real options can be used to fill this empty hole .Based on the work by Smets (1991) standard models are identified, and they are analyzed by applying a method involving symmetric mixed strategies.As an illustration, extensions regarding asymmetry, technology adoption and decreasing uncertainty over time are reviewed.Among others, it is found that the value of a high cost firm can increase in its own cost.Furthermore, it is established to what extent investments are delayed when technologial progress is anticipated, and it is found that competition can be bad for welfare.

We examine contributions to a public good when some donors do not know the true value of the good.If donors in such an environment determine the sequence of moves, two contribution orders may arise as equilibria.Either the uninformed and informed donors contribute simultaneously or the informed contribute prior to the uninformed.Sequential moves result in a larger provision of the public good, because the follower mimics the action of the leader, and in accounting for this response the leader chooses to contribute when it is efficient to do so.An experimental investigation of the game shows that the donors predominantly choose to contribute sequentially, and that the resulting contributions are larger than those of the simultaneous-move game.Although the gain from sequential moves is smaller when the sequence is set exogenously, our results suggest that the involved parties would benefit from having sequential moves imposed upon them.

As becomes apparent from the standard text books in industrial organization (cf.Tirole, 1988, The Theory of Industrial Organization), the analysis of the e.ects of uncertainty within this field is yet underdeveloped.This paper shows that the new theory of strategic real options can be used to fill this empty hole .Based on the work by Smets (1991) standard models are identified, and they are analyzed by applying a method involving symmetric mixed strategies.As an illustration, extensions regarding asymmetry, technology adoption and decreasing uncertainty over time are reviewed.Among others, it is found that the value of a high cost firm can increase in its own cost.Furthermore, it is established to what extent investments are delayed when technologial progress is anticipated, and it is found that competition can be bad for welfare.

Suppose two parties have to share a surplus of random size.Each of the two can either commit to a demand prior to the realization of the surplus - as in the Nash demand game with noise - or remain silent and wait until the surplus was publicly observed.Adding the strategy to wait to the noisy Nash demand game results in two strict equilibria, in each of which one player takes almost the whole surplus, provided uncertainty is small.If commitments concern only who makes the first offer, the more balanced Nash bargaining solution is approximately restored.In all cases commitment occurs in equilibrium, even though this entails the risk of breakdown of negotiations.

This paper considers the problem of investment timing under uncertainty in a duopoly framework.When both firms want to be the first investor a coordination problem arises.Here, a method is proposed to deal with this coordination problem, involving the use of symmetric mixed strategies.The method is based on Fudenberg and Tirole (1985, Review of Economic Studies), where it was designed within a deterministic framework.The aim of our paper is to extend the applicability of this method to a stochastic environment.The need for this is exemplified by the fact that several recent contributions in multiple firm real option models make unsatisfactory assumptions to solve the coordination problem mentioned above.Moreover, our approach allows us to show that in many cases it is incorrect to claim that "the probability that both firms invest simultaneously, while it is only optimal for one firm to invest, is zero".

This paper considers the problem of investment timing under uncertainty in a duopoly framework.When both firms want to be the first investor a coordination problem arises.Here, a method is proposed to deal with this coordination problem, involving the use of symmetric mixed strategies.The method is based on Fudenberg and Tirole (1985, Review of Economic Studies), where it was designed within a deterministic framework.The aim of our paper is to extend the applicability of this method to a stochastic environment.The need for this is exemplified by the fact that several recent contributions in multiple firm real option models make unsatisfactory assumptions to solve the coordination problem mentioned above.Moreover, our approach allows us to show that in many cases it is incorrect to claim that "the probability that both firms invest simultaneously, while it is only optimal for one firm to invest, is zero".

Suppose two parties have to share a surplus of random size.Each of the two can either commit to a demand prior to the realization of the surplus - as in the Nash demand game with noise - or remain silent and wait until the surplus was publicly observed.Adding the strategy to wait to the noisy Nash demand game results in two strict equilibria, in each of which one player takes almost the whole surplus, provided uncertainty is small.If commitments concern only who makes the first offer, the more balanced Nash bargaining solution is approximately restored.In all cases commitment occurs in equilibrium, even though this entails the risk of breakdown of negotiations.

This paper considers the problem of investment timing under uncertainty in a duopoly framework.When both firms want to be the first investor a coordination problem arises.Here, a method is proposed to deal with this coordination problem, involving the use of symmetric mixed strategies.The method is based on Fudenberg and Tirole (1985, Review of Economic Studies), where it was designed within a deterministic framework.The aim of our paper is to extend the applicability of this method to a stochastic environment.The need for this is exemplified by the fact that several recent contributions in multiple firm real option models make unsatisfactory assumptions to solve the coordination problem mentioned above.Moreover, our approach allows us to show that in many cases it is incorrect to claim that "the probability that both firms invest simultaneously, while it is only optimal for one firm to invest, is zero".

Suppose two parties have to share a surplus of random size.Each of the two can either commit to a demand prior to the realization of the surplus - as in the Nash demand game with noise - or remain silent and wait until the surplus was publicly observed.Adding the strategy to wait to the noisy Nash demand game results in two strict equilibria, in each of which one player takes almost the whole surplus, provided uncertainty is small.If commitments concern only who makes the first offer, the more balanced Nash bargaining solution is approximately restored.In all cases commitment occurs in equilibrium, even though this entails the risk of breakdown of negotiations.

This paper considers the problem of investment timing under uncertainty in a duopoly framework.When both firms want to be the first investor a coordination problem arises.Here, a method is proposed to deal with this coordination problem, involving the use of symmetric mixed strategies.The method is based on Fudenberg and Tirole (1985, Review of Economic Studies), where it was designed within a deterministic framework.The aim of our paper is to extend the applicability of this method to a stochastic environment.The need for this is exemplified by the fact that several recent contributions in multiple firm real option models make unsatisfactory assumptions to solve the coordination problem mentioned above.Moreover, our approach allows us to show that in many cases it is incorrect to claim that "the probability that both firms invest simultaneously, while it is only optimal for one firm to invest, is zero".