Real Options "in" Projects and Systems Design ... - Title Page - MIT

264technical, economic, and real options. By specifying the interdependencies byconstraints, we can take into account highly complex relationship among projects.This formulation has important application in real options “in” projects because the realoptions constraints can be readily added onto the screening model. This formulation candeal with complex interdependency/path-dependency among options by specifying theinterdependency/path-dependency in the technical and economic constraints.8.4. Application of the framework – illustrated bydevelopment of strategies for a series ofhydropower damsThis section illustrates the application of the framework by an example on the strategy ofa river basin development. The case example concerns the development of ahypothetical river basin involving decisions to build dams and hydropower stations inChina. The developmental objective is mainly for hydro-electricity production. Irrigationand other considerations are secondary because the river basin is in a remote and barrenplace.8.4.1. Screening model to identify optionsThe screening model is the first cut of the design space that focuses on the importantissues and low fidelity in nature, like looking at the system at a 30,000 feet height for anoverview. The screening model may be simplified in a number of ways. In the river basin