As becomes apparent from the standard text books in industrial organization (cf. Tirole, 1988, The Theory of Industrial Organization), the analysis of the effects of uncertainty within this field is yet underdeveloped. This paper shows that the new theory of strategic real options can be used to fill this gap. Based on the work by Smets (1991) standard models are identified, and they are analyz...

The rapid technological change and uncertain future evolutions have a large impact on investment projects in the telecommunication sector. When new infrastructure networks are rolled out, the initial assumptions can prove to be untrue in the future, severely impacting the payoff. It is therefore extremely important that projects offer flexibility to allow the management to react to unforeseen c...

Continuous supplier selection, evaluation and reselection are among buying firms' key processes to improve their overall performance. This paper aims at increasing knowledge on effective dynamic management by answering the following research question: Do performance decomposition technique real option theory represent appropriate mechanisms understand structural change in supply chain subsequen...

This paper investigates irreversible investment with financial constraints by comparing two approaches based on Tobin's q and the real options theories. The paper examines capital investment in two distinct periods. Tobin's q approach shows different results between the two periods. However, the real options approach yields estimates which are similar for the two periods and compatible with the...

The purpose of this paper is to investigate the relationships between the constructs of Real Option Theory (ROT) and Innovation Diffusion Theory (IDT) along with their impacts on new IT projects adoption. Unlike the more traditional techniques, real options theory explicitly accounts for uncertainty and future flexibility. Those variables are missed in all traditional innovation adoption theori...

This paper presents a novel method to evaluate the economic feasibility of Fiber-to-the-Home networks resorting to state-of-the-art techniques. The method presented in this paper is a powerful combination of game theory, advanced capital budgeting algorithms with real options and Monte Carlo simulations with complex statistical distributions to evaluate project risk. Index Terms — FTTH, Game th...

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 innova...