The Option Game Model of Research and Development Investment Timing under Uncertainty

Abstract

The research and development (R&D) investment timing decision-making problem is studied based on option game theory in this paper. The existence and inequality of two businesses operating costs are assumed, and jump diffusion is used to describe sudden events. The duopoly option game model is established to obtain the R&D investment value function and the critical value to invest. The game strategy and profit matrix of both firms are constructed, to discuss the existing forms of equilibrium, so that each timing for sequential equilibrium, preemptive equilibrium and simultaneous equilibrium is achieved.