Game Theoretic Real Option Approach of the Procurement of Department of Defense: Competition or Collaboration

Abstract

The real option analysis for investments is well known. In order to make decisions (delay, stop, start up, continue), management is waiting to collect more information, or is waiting for a better environment (market situation, political situation and so on). However this is without taking into account the (inter)actions of the other players in the market. Option games will place the real options into a strategic (game theoretic) context., i.c. DoD for procurement. In reality, the complexity of real options and the need for the permanent monitoring of the environment make some managers reluctant to introduce it in the enterprise for investment decision-making. A generic framework Intelligence Base is being proposed to approach intelligence and game options in a holistic way for the strategy and the investments.