Investment and operational decisions for start-up companies: A game theory and Markov decision process approach

Thomas Archibald, Edgar Possani

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

This paper analyses the contract between an entrepreneur and an investor, using a non-zero sum game in which the entrepreneur is interested in company survival and the investor in maximizing expected net present value. Theoretical results are given and the model's usefulness is exemplified using simulations. We have observed that both the entrepreneur and the investor are better of under a contract which involves repayments and a share of the start-up company. We also have observed that the entrepreneur will choose riskier actions as the repayments become harder to meet up to a level where the company is no longer able to survive.
Original languageEnglish
Pages (from-to)1-14
Number of pages14
JournalAnnals of Operations Research
VolumeN/A
Early online date23 Oct 2019
DOIs
Publication statusE-pub ahead of print - 23 Oct 2019

Keywords / Materials (for Non-textual outputs)

  • finance
  • start-up finance
  • risk analysis
  • Markov decision process
  • contract design

Fingerprint

Dive into the research topics of 'Investment and operational decisions for start-up companies: A game theory and Markov decision process approach'. Together they form a unique fingerprint.

Cite this