Dynamic Stability of Cooperative Investment Under Uncertainty

Modeling Cooperative and Noncooperative Incentives in Investment Projects: A Novel Approach Using Cooperative Game Theory and Real Options Theory In “Dynamic Stability of Cooperative Investment under Uncertainty,” Ketelaars, Borm, and Kort study an investment project involving multiple stakeholders. The research was prompted by the fact that many infrastructure projects, such as Feyenoord City in Rotterdam, Netherlands, and the new Berlin airport, failed or were significantly delayed. Recognizing that the various stakeholders have outside options, the authors combine concepts from cooperative game theory and real options to analyze a coalitional and dynamic stability concept. They characterize the proportional investment scheme as the scheme that maximizes total project value and results in the earliest investment timing. They show that dynamic stability can be present when the market is stable and when the market is growing and volatile. However, the proportional investment scheme is more sensitive to dynamic instability in a market with high profit growth and low profit uncertainty, or vice versa.

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Publication Details

Journal
Operations Research
Published
2025-02-24
DOI
https://doi.org/10.1287/opre.2023.0488
Primary Topic
Capital Investment and Risk Analysis
Type
article
Field-Weighted Citation Impact
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article

Dynamic Stability of Cooperative Investment Under Uncertainty

Martijn Ketelaars, Peter M. Kort, Peter Borm
Operations Research
Capital Investment and Risk Analysis
article

Dynamic Stability of Cooperative Investment Under Uncertainty

Martijn Ketelaars, Peter M. Kort, Peter Borm
article en

Abstract

Modeling Cooperative and Noncooperative Incentives in Investment Projects: A Novel Approach Using Cooperative Game Theory and Real Options Theory In “Dynamic Stability of Cooperative Investment under Uncertainty,” Ketelaars, Borm, and Kort study an investment project involving multiple stakeholders. The research was prompted by the fact that many infrastructure projects, such as Feyenoord City in Rotterdam, Netherlands, and the new Berlin airport, failed or were significantly delayed. Recognizing that the various stakeholders have outside options, the authors combine concepts from cooperative game theory and real options to analyze a coalitional and dynamic stability concept. They characterize the proportional investment scheme as the scheme that maximizes total project value and results in the earliest investment timing. They show that dynamic stability can be present when the market is stable and when the market is growing and volatile. However, the proportional investment scheme is more sensitive to dynamic instability in a market with high profit growth and low profit uncertainty, or vice versa.

Operations ResearchVol. 73(6)
Tilburg University (NL)
Openalex Percentile: Top 100%
Capital Investment and Risk Analysis
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