Abstract
We develop a competitive investment model wherein two competing firms consider investing into two projects targeting, separately, a mature and an emerging market. The returns firms obtain from investments into these markets are assumed to follow an S-shaped curve and depend on both firms’ actions. Considering symmetric environments (in terms of investment opportunities), we find that different forms of interactions may arise (e.g., Prisoner’s Dilemma and Game of Chicken) and outline corresponding strategies that offer higher returns by exploiting first-mover advantages, cooperation opportunities and aggressive choices. We also discuss the market conditions that can lead to these outcomes. Finally, considering non-symmetric environments, we show that a firm may be better off when its competitor’s budget increases.
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