The Option Game Model and Its Development of R and D Investment

Smit and Trigeorgis (1997, 2003) have had the biggest contribution to this kind of R&D investment model. Huisman and Kort (1998, 1999) have developed the standard option game model under symmetric duopoly. They extend the thought of Fudenberg and Tirole (1985) on solving the equilibrium of the model and analytical framework of Stenbacka and Tombak (1994) on modeling the characteristics of technology. This paper first analyzes the option game model of R&D, inquiries into this model approach under technology adoption, patent competition, and considering asymmetric information and stochastic collusion, displays the development history and thought point of option game theory about R&D.