A new formulation of strategic interactions in a fluctuating market (Q840632)

Summary: Although attempts have been made in operations research to combine real option theory and game theory as examining the consequences of stochastic interaction in decision making, the considered situation is limited to the scenario where firms interact over \textit{one} project and each firm exercises its option \textit{only once}. The present paper attempts to extend these studies by combining real option theory with \textit{repeated} game theory. We derive the Nash equilibrium of the strategies of two clothing retailers who manage the number of 'seasons' in order to stay in harmony with the fluctuation of demands.