Rival Options in a Revenue-Declining Duopoly Market

Event details

We present a theoretical leader-follower model to determine the optimal timing for divesting an incumbent technology or switching to a more efficient alternative, considering both uncertainty and competition in a duopoly revenue-declining market. We provide solutions for the value of these options, as well as the firms’ optimal thresholds for switching and divesting. Holding the option to switch simultaneously with the option to divest creates additional incentives to postpone divestment, particularly for the follower. Therefore, the common view among analysts that firms “delay for too long” divestment may not be valid.

Biography

Dr Alcino Azevedo is a Reader in Finance at Aston Business School, where he leads the Finance Group within the Economics, Finance, and Entrepreneurship (EFE) Department. Prior to this role, he served as the Research Director of the EFE Department from 2018 to 2020. His research has been published in several prestigious academic journals, including the Journal of Financial Economics, European Journal of Operational Research, and the International Journal of Finance and Economics, among others.

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