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Du, J, Zhao, D and Zhang, O (2019) Impacts of human communication network topology on group optimism bias in Capital Project Planning: a human-subject experiment. Construction Management and Economics, 37(01), 44–60.

Lindblad, H (2019) Black boxing BIM: the public client’s strategy in BIM implementation. Construction Management and Economics, 37(01), 1–12.

van den Boomen, M, Spaan, M T J, Schoenmaker, R and Wolfert, A R M (2019) Untangling decision tree and real options analyses: a public infrastructure case study dealing with political decisions, structural integrity and price uncertainty. Construction Management and Economics, 37(01), 24–43.

  • Type: Journal Article
  • Keywords: Real options; decision analysis; infrastructure planning; replacement; uncertainty;
  • ISBN/ISSN: 0144-6193
  • URL: https://doi.org/10.1080/01446193.2018.1486510
  • Abstract:
    Managerial flexibility in infrastructure investment and replacement decisions adds value. Real options analysis (ROA) captures this value under uncertain market prices. The concept of ROA is that future unfavourable payoffs can be deferred as soon as more information about market prices becomes available. The popularity of ROA is seen in a growing number of case studies on real assets. Despite its increasing popularity, ROA has not gained a foothold in public infrastructure decision making. One of the difficulties in the application of ROA is the required estimation of market variables. To avoid this, a simplified but not correct version of ROA is easily applied, referred to as a Decision Tree Approach (DTA) to ROA. Another difficulty is that infrastructure assets are subject to other types of uncertainties, defined here as asset uncertainties. This study investigates the value of managerial flexibility in a public infrastructure replacement decision. The uncertainty drivers are the strength of a bridge, political decisions regarding traffic flow and the price development of construction costs. Three valuation approaches are compared: DTA, ROA and the DT approach to ROA. Although it is complex, ROA certainly adds value in public infrastructure decision making when market price uncertainty is prevalent. However, in the absence of reasonable estimates of market variables, the DT approach to ROA is the best alternative. In the absence of market price uncertainties, ROA should be avoided DTA is to be preferred.

Volker, L (2019) Looking out to look in: inspiration from social sciences for construction management research. Construction Management and Economics, 37(01), 13–23.