Directed search with real options
AbstractWhile search is normally modelled by economists purely in terms of decisions over making observations, this paper models it as a process in which information is gained through feedback from innovatory product launches. The information gained can then be used to decide whether to exercise real options. In the model the initial decisions involve a product design and the scale of production capacity. There are then real options to change these factors based on what is learned. The case of launching product variants in parallel is also considered. Under 'true' uncertainty, the model can be seen in terms of heuristic decision-making based on subjective beliefs with limited foresight. Search costs, the values of the real options, beliefs, and the cost of capital are all shown to be significant in determining the search path.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.
Volume (Year): 19 (2010)
Issue (Month): 6 ()
Contact details of provider:
Web page: http://www.tandfonline.com/GEIN20
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.