Real option game with a random regulator: the value of being preferred



Adrien Nguyen Huu

We attempt to formalize a randomization procedure undertaken in pre-emptive real option games without simultaneous investment. This allows to propose a unified treatment of both real option games with and without simultaneous investment. This is done by introducing a random arbitrator with different parametrization. We then extend the study to an unfair arbitrator. This leads to competitive advantages in various asymmetrical situations. Relying on the results of [4], we apply the procedure to the risk-neutral and the risk-averse profiles in a stochastic pre-emptive real option game in complete market. The risk-averse case gives us the opportunity to study a new phenomenon we call aversion for confrontation, and its impact on the asymmetrical game.