dSEA Lecture Series: "The dynamics of preemptive and follower investments with overlapping ownership"

We are pleased to welcome Dimitrios Zorpmas, Assistant Professor at the Department of Economics of the University of Macedonia, as guest speaker for this lecture series as part of the Investment Evaluation course, taught by Prof. Michele Moretto, included in our Master’s degree in Applied Economics (MAE).

The effects of overlapping ownership on investment decisions in a preemption race under market uncertainty are analyzed. Internalization of rival payoffs delays follower entry when product market effects are moderate, extending incumbency and intensifying competition to lead. Investment thresholds for both leaders and followers increase with volatility, as in standard real option models, while firm value may decline and higher volatility strengthens the profitability of internalization. From a welfare perspective, overlapping ownership involves a tradeoff between dynamic benefits and static costs. In some markets the socially optimal level of overlapping ownership is zero, whereas at low volatility firms exhibit insufficient incentives to internalize.