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Investment reluctance in supply chains: An agent-based real options approach

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  • Balmann, Alfons
  • Kataria, Karin
  • Musshoff, Oliver

Abstract

This paper shows how agent-based stochastic approaches can provide a complementary and more flexible approach to study investment incentives and price dynamics in a real options framework. We particularly study the case of two-stage production chains in which one sector produces an intermediate product and the other the final product, and the intermediate product is traded on the spot market. An agent-based competitive model using a genetic algorithm allows us to explicitly model the behaviors and interactions of the firms competing in each subsector and trading the intermediate product with each other on a spot market, and optimal investment strategies can be identified.

Suggested Citation

  • Balmann, Alfons & Kataria, Karin & Musshoff, Oliver, 2013. "Investment reluctance in supply chains: An agent-based real options approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 3(2A), pages 1-10.
    • Handle: RePEc:zbw:espost:171341
    DOI: 10.4236/jmf.2013.32A001
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    References listed on IDEAS

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    2. Kersting, Stefan & Hüttel, Silke & Odening, Martin, 2015. "Structural change in agriculture under capacity constraints: An equilibrium approach," Thuenen-Series of Applied Economic Theory 140, University of Rostock, Institute of Economics.

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