Abstract: Most of option game literatures on investment decision in technology innovation ignore asymmetric investment cost and operation cost among firms. Investment decision making in technology innovation of asymmetric cost duopoly is studied in this paper.Firstly,value function and investment threshold are derived.Then three equilibriums such as preemptive,sequential and simultaneous equilibrium are discussed,and the results indicate that when the asymmetry among firms is relatively small and so is the first-mover advantage,the firms invest jointly;when the first-mover advantage is significant,the lower-cost firm preempts the higher-cost firm to be a leader;in the situation where the asymmetry among firms becomes sufficiently large,the firms exercise their investment options sequentially.Finally,numerical techniques are employed to calculate the optimal investment thresholds of duopoly and the findings are consistent with the theoretic results.

Key words: technology innovation investment decision making, option game, asymmetric duopoly, equilibrium