Evaluating New Product Platform Development Projects: A Game Theoretic Real Option Approach

Abstract

Companies invest enormous capital on projects to develop strategic product platforms. the traditional evaluation tools such as Net Present Value (NPV) do not consider uncertainties and the new tools such as real options do not account for competitors' strategy during the product development period. in this paper, we propose a game theoretic real option methodology which addresses shortcomings of both traditional and non-traditional tools. We build our methodology by considering New Product Development (NPD) as a game which is contingent upon the uncertainties of the project outcomes and anticipated competition in the market. in this paper, we present the methodology to evaluate the new product development projects using game theoretic real option approach.

Department(s)

Engineering Management and Systems Engineering

Keywords and Phrases

Game theory; Product platform development; Real option; Uncertainty

Document Type

Article - Conference proceedings

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2024 Scimago Journal & Country Rank, All rights reserved.

Publication Date

01 Dec 2005

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