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A robustness framework for monitoring real options under uncertainty

  • Driouchi, Tarik
  • Leseure, Michel
  • Bennett, David
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    This paper presents a problem structuring methodology to assess real option decisions in the face of unpredictability. Based on principles of robustness analysis and scenario planning, we demonstrate how decision-aiding can facilitate participation in projects setting and achieve effective decision making through the use of real options reasoning. We argue that robustness heuristics developed in earlier studies can be practical proxies for real options performance, hence indicators of efficient flexible planning. The developed framework also highlights how to integrate real options solutions in firms' strategic plans and operating actions. The use of the methodology in a location decision application is provided for illustration.

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    Article provided by Elsevier in its journal Omega.

    Volume (Year): 37 (2009)
    Issue (Month): 3 (June)
    Pages: 698-710

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    Handle: RePEc:eee:jomega:v:37:y:2009:i:3:p:698-710
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    15. Arnd Huchzermeier & Christoph H. Loch, 2001. "Project Management Under Risk: Using the Real Options Approach to Evaluate Flexibility in R...D," Management Science, INFORMS, vol. 47(1), pages 85-101, January.
    16. Bruce Kogut & Nalin Kulatilaka, 1994. "Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network," Management Science, INFORMS, vol. 40(1), pages 123-139, January.
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