Competitive Strategy: Options and Games

by Benoit Chevalier-Roignant, Lenos Trigeorgis, Avinash K. Dixit (Foreword by)

Overview

A new paradigm for balancing flexibility and commitment in management strategy through the amalgamation of real options and game theory.

Corporate managers who face both strategic uncertainty and market uncertainty confront a classic trade-off between commitment and flexibility. They can stake a claim by making a large capital investment today, influencing their rivals' behavior, or they can take a “wait and see” approach to avoid adverse market consequences tomorrow. In Competitive Strategy, Benoît Chevalier-Roignant and Lenos Trigeorgis describe an emerging paradigm that can quantify and balance commitment and flexibility, “option games,” by which the decision-making approaches of real options and game theory can be combined.

The authors first discuss prerequisite concepts and tools from basic game theory, industrial organization, and real options analysis, and then present the new approach in discrete time and later in continuous time. Their presentation of continuous-time option games is the first systematic coverage of the topic and fills a significant gap in the existing literature.

Competitive Strategy provides a rigorous yet pragmatic and intuitive approach to strategy formulation. It synthesizes research in the areas of strategy, economics, and finance in a way that is accessible to readers not necessarily expert in the various fields involved.

Product Details

ISBN-13:	9780262526715
Publisher:	MIT Press
Publication date:	08/29/2014
Series:	The MIT Press
Edition description:	Reprint
Pages:	516
Product dimensions:	8.70(w) x 5.70(h) x 1.00(d)
Age Range:	18 Years

About the Author

Benoît Chevalier-Roignant has been a management consultant for several years and currently is in a management position in the finance department of an international airline company.

Lenos Trigeorgis is the Bank of Cyprus Chair Professor of Finance in the School of Economics and Management at the University of Cyprus and Professor of Finance at King's College of the University of London. He is the author of Real Options (MIT Press), Strategic Investment, and other books.

What People are Saying About This

Karel Cool

Competitive Strategy provides a masterful treatment of the use of options and game theory in the analysis of fundamental strategy problems such as capacity expansion, pre-emption, first vs. late mover positioning, etc. Flexibility and commitment are essential characteristics of any competitive strategy and Trigeorgis and Chevalier-Roignant give us a most insightful and practical set of models and tools. This is a must read book for any strategy scholar and decision maker.

Robert C. Merton

Competitive Strategy provides a powerful synthesis of modern finance and corporate strategy. Today we can anticipate innovation in strategic advice and its implementation. Who better to prepare us for it than Lenos Trigeorgis, with his experiences as serious academic researcher, skilled consultant and seasoned teacher, and Benoit Chevalier-Roignant with the fresh, innovative mind of a young scholar? Their carefully developed exposition exemplifies the power of real options and games to clarify and quantify the strategic decision-making of the firm. The authors skillfully transform the art of strategy into 'strategic science'.

Endorsement

This book unifies two major strands of economic theory—real options and games—into a single, coherent framework, and then shows how these ideas can be applied to the formulation of corporate strategy in a rigorous fashion. With deep knowledge, Trigeorgis and Chevalier-Roignant take the art of strategy to new heights of analytic sophistication.—Carliss Baldwin, William L. White Professor of Business Administration, Harvard University

From the Publisher

The last two decades have brought a trickle of research that addresses some aspect of the dilemma between flexibility and strategic commitment. Benoît Chevalier-Roignant and Lenos Trigeorgis synthesize and consolidate much of this literature and skillfully extend it. With its excellent exposition and focus on applications to industrial organization and business, this book can serve generations of researchers as a hypermarket for one-stop intellectual shopping.

—Avinash Dixit, John S. F. Sherrerd ´52 University Professor of Economics Emeritus, Princeton University

Competitive Strategy provides a masterful treatment of the use of options and game theory in the analysis of fundamental strategy problems such as capacity expansion, pre-emption, first vs. late mover positioning, etc. Flexibility and commitment are essential characteristics of any competitive strategy and Trigeorgis and Chevalier-Roignant give us a most insightful and practical set of models and tools. This is a must read book for any strategy scholar and decision maker.

—Karel Cool, Professor of Strategic Management and BP Chaired Professor of European Competitiveness, INSEAD, France

Competitive Strategy provides a powerful synthesis of modern finance and corporate strategy. Today we can anticipate innovation in strategic advice and its implementation. Who better to prepare us for it than Lenos Trigeorgis, with his experiences as serious academic researcher, skilled consultant and seasoned teacher, and Benoit Chevalier-Roignant with the fresh, innovative mind of a young scholar? Their carefully developed exposition exemplifies the power of real options and games to clarify and quantify the strategic decision-making of the firm. The authors skillfully transform the art of strategy into 'strategic science'.

—Robert C. Merton, Nobel Laureate in Economic Sciences

This book unifies two major strands of economic theory—real options and games—into a single, coherent framework, and then shows how these ideas can be applied to the formulation of corporate strategy in a rigorous fashion. With deep knowledge, Trigeorgis and Chevalier-Roignant take the art of strategy to new heights of analytic sophistication.

—Carliss Baldwin, William L. White Professor of Business Administration, Harvard University

Carliss Baldwin

This book unifies two major strands of economic theory—real options and games—into a single, coherent framework, and then shows how these ideas can be applied to the formulation of corporate strategy in a rigorous fashion. With deep knowledge, Trigeorgis and Chevalier-Roignant take the art of strategy to new heights of analytic sophistication.

Avinash Dixit

The last two decades have brought a trickle of research that addresses some aspect of the dilemma between flexibility and strategic commitment. Benoît Chevalier-Roignant and Lenos Trigeorgis synthesize and consolidate much of this literature and skillfully extend it. With its excellent exposition and focus on applications to industrial organization and business, this book can serve generations of researchers as a hypermarket for one-stop intellectual shopping.