OPTIMAL R&D PROJECT VALUATIONS UNDER INDUSTRY COMPETITIONS AND INCOMPLETET INFORMATION

[[abstract]]The valuation of R&D project involving a number of interdisciplinary knowledge has become an important research field of service science. Traditional researches on R&D project valuations do not consider the influences of technological progress and gradual information revelations on R&D investments. This study develops a framework for optimal valuations of R&D projects under industry competition and incomplete information, which is not considered in traditional real option literature. This study also includes manager's risk preference in considering the optimal exercise policy, which has substantial impacts on the investment timing. The results of this study provide a deeper understanding of the influences of various uncertainties on R&D project valuations and decision makings. The explicit formulas for the optimal valuation and exercise policy of an R&D project provided by this study help managers making good decisions on their investments