Finance, Markets and Valuation
Vol. 7, Num. 2 (July-December 2021), 18–37
Title: Games Theory and Real Options: A model to asses strategies, agreements and penalties
Authors: Gastón Milanesi
DOI: 10.46503/RRGP4512
Abstract:
In competitive environments, the design and election of strategies demand to consider three potential sources of uncertainty: risks derived from self-actions, risks emerged from states of nature and risks derived from competitors´ decisions. For that, a numerical model that considers the competitors´ actions is required, for value strategies, join venture design and penalty quantification. The paper proposes a simple numerical model of Game Theory and Real Options with multiples source of risk. The first part exposes the mathematical basis of the model. Its functioning is illustrated with the cases valuation related to strategies without collaborative agreement. Next, the cooperation strategy and default monetary penalties are valued. Finally, the main conclusions are exposed.
Keywords: Evaluation of strategies; Multinomial real options; Games theory; Initiative strategy; Strategic agreement; Assessment of penalties
