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buying real options – valuing uncertainty in infrastructure planning

Buying real options – Valuing uncertainty in infrastructure planning
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Herder, Paulien M.; Jeroen de Joode; Andreas Ligtvoet; Sigrid Schenk and Poonam Taneja: Buying real options – Valuing uncertainty in infrastructure planning, pp. 961-969.In: Futures, Volume 43, Issue 9 (November 2011). [s.l.]: Elsevier Science, 2011. ISSN: 0016-3287.

Paulien Herder
Jeroen de Joode
Andreas Ligtvoet
Sigrid Schenk
Poonam Taneja

For the last two decades real options thinking has been heralded as a new approach for handling uncertainty in investment decisions. However, application of the approach in infrastructure investment decision-making is negligible thus far. In this contribution we address the question: what are the barriers for the implementation of the real option approach (ROA) in practice? We focus on the experiences in several infrastructure-bound sectors: spatial planning and transport, ports, and energy.

We conclude that the ROA maturity levels of these different sectors are quite different, and we ascribe these differences to the political setting, the institutional setting and the organisational flexibility of the sectors and their stakeholders. We suggest that the same issues apply to other advanced, quantitative methods.

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