Real options and game theoretical approaches to real estate development projects: multiple equilibria and the implications of different tie-breaking rules

Gabrieli, T. and Marcato, G. ORCID: https://orcid.org/0000-0002-6266-4676, (2010) Real options and game theoretical approaches to real estate development projects: multiple equilibria and the implications of different tie-breaking rules. Working Papers in Real Estate & Planning. 09/10. Working Paper. University of Reading, Reading. pp33.

Abstract/Summary

This paper contributes to a fast growing literature which introduces game theory in the analysis of real option investments in a competitive setting. Specifically, in this paper we focus on the issue of multiple equilibria and on the implications that different equilibrium selections may have for the pricing of real options and for subsequent strategic decisions. We present some theoretical results of the necessary conditions to have multiple equilibria and we show under which conditions different tie-breaking rules result in different economic decisions. We then present a numerical exercise using the in formation set obtained on a real estate development in South London. We find that risk aversion reduces option value and this reduction decreases marginally as negative externalities decrease.

Additional Information	Game theory and real options, equilibrium selection, real estate development
Item Type	Report (Working Paper)
URI	https://reading-clone.eprints-hosting.org/id/eprint/26987
Item Type	Report
Divisions	Henley Business School > Real Estate and Planning
Additional Information	Game theory and real options, equilibrium selection, real estate development
Publisher	University of Reading
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