research
Real Options: Examples and Principles of Valuation and Strategy
- Publication date
- 1 January 2003
- Publisher
- The paper illustrates the use of real options and game theory principles to value
prototypical investment projects and capture important competitive/strategic
dimensions in a step-by-step analysis of investment decisions (options) under
uncertainty. It first illustrates the application of real options principles to a mining
concession and to an R&D program. It then provides examples from innovation cases
and uses basic game theory principles to discuss other strategic and competitive
aspects, especially applicable to oligopolistic industries like consumer electronics.
The issue of whether (and when) it is optimal to compete independently or
coordinate/collaborate (e.g., via joint R&D ventures or strategic alliances) is given
particular attention.