A Real Options and Game-Theoretic Approach to

Han Smit () and L. A. Ankum

Financial Management, 1993, vol. 22, issue 3

Abstract: An investment strategy encompasses a sequence of tactical investment projects, of which several may yield a low return when considered in isolation. Some low-return investment projects can actually be seen as the first links in a chain of subsequent investment decisions. The value of these projects does not derive so much from their expected cash inflows but rather from the option to invest in a follow-up project for future commercial exploitation. For example, an R&D project, the development of a new technology, or entry into a new geographical market may create future investment opportunities. In strategy, these projects are often compared with options for future company growth.

Date: 1993
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