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"Complex" Real Options - Title Page - MIT

"Complex" Real Options - Title Page - MIT

affiliation, and

affiliation, and presented in the following categories; government transportation agencies,elected officials, business related interests, and citizen / environmental interests.9.3.1 GOVERNMENT AGENCIESIn the Houston metro area, government control of the transportation network isfragmented between several different agencies. The major stakeholders providingtransportation services include: the City of Houston, Harris county (and the other sevencounties surrounding Harris Country), Houston’s transit agency Metro, the toll roadoperator Harris County Toll Road Authority (HCTRA), the metropolitan planningorganization Houston-Galveston Area Council (H-GAC), and the ITS coordination andoperations organization Greater Houston Transportation and Emergency ManagementCenter (TranStar). At the state level, the Texas Department of Transportation (TxDOT)has twenty five local districts, one of which, the Houston District, is responsible fortransportation activities within the Houston area. At the Federal level, the USDepartment of Transportation also is involved in transportation planning, usually throughthe Federal Highway Administration (FHWA) or the Federal Transit Authority (FTA).The following gives a brief overview of the role that each agency plays in Houston’stransportation system.Several organizational charts are included in the discussion below to help illustrate therelationship between the different stakeholders. Stakeholder organizations were aninterview was conducted are highlighted in each chart.9.3.1.1 City of HoustonThe City of Houston’s Public Works and Engineering Division is responsible for the“administration, planning, maintenance, construction management and technicalengineering of the City's infrastructure” (City of Houston PW&E 2007). This includes,among other public utilities, the transportation infrastructure, such as local roads, with16,000 lane miles (City of Houston PW&E 2007), and traffic control intersections.An interview was conducted with the primary Mayoral political appointee fortransportation policy issues, the Executive Assistant to Mayor for TransportationPlanning. This is shown in the organizational chart in Figure 9-6.9.3.1.2 Harris CountyHarris County is the major county by population in the Houston metro area. Thetransportation responsibilities of Harris County for providing local road infrastructure andintersections are similar to those for the City of Houston, but extend outside of the city’sborders.Harris County has major transportation related responsibilities as about 1.7 of the 3.7million Harris County residents live outside of Houston city limits. For these citizens,Harris County is the sole provider of transportation services. As an indicator of the366

importance that Harris County plays in the provision of transportation infrastructure, thesize of Harris County is 1,778 square miles, compared to 1,214 square miles for the stateof Rhode Island. The population of Harris County living outside of Houston City limitsthat rely solely on Harris County for transportation needs is about 1.7 million, comparedwith about 1 million for Rhode Island.An interview was conducted with the Harris County Manager of Traffic andTransportation and the Harris County Director of Transportation and InfrastructureInitiatives, a political appointee of the county judge. This is shown in the organizationalchart in Figure 9-6.The Houston metropolitan region consists of seven other counties, with each of thesurrounding counties providing similar services as Harris country, though at a smallerscale, reflecting their population sizes and travel needs. Figure 9-7 shows the counties inthe Houston region.9.3.1.3 MetroThe Metropolitan Transit Authority of Harris County, or Metro, is the transit serviceprovider for the Houston region. Metro operates multiple transit modes, including lightrail in downtown, local buses and commuter buses. In addition, Metro built, operates andenforces travel on the high occupancy vehicle (HOV) lanes in Houston, which is one ofthe most extensive networks in the country, at over 105 lane miles (Metro 2007). Metroprovides a variety of other services, such as para-transit, ride matching, motoristassistance and park and ride operations.9.3.1.4 HCTRAThe Harris Country Toll Road Authority (HCTRA) is a special authority created to buildand manage toll roads in the Houston metro area. HCTRA has built a series of toll roads,83 miles over multiple toll roads (HCTRA 2007), and substantial supportinginfrastructure, such as bridges and ITS capabilities, to support the toll roads. HCTRAwas formed in 1983 as a result of funding shortfalls in both TxDOT and, the nowdisbanded, Texas Turnpike Authority. These funding shortfalls prevented several majorHouston area roads from being funded and built at the time. As the roads were left to befunded locally, and Harris County also could not fund the roads from its general budget,HCTRA was created via voter referendum to build two of these roads. Since then,HCTRA has expanded its system to include additional toll roads around the Houstonarea, with plans for more roads being actively pursued.367

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    ACKNOWLEDGEMENTSThis dissertation i

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    students. I am sure I am missing pe

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    6.7 Enterprise and Institutional Ch

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    Table 8-8 Summary of existing mode

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    Figure 3-17 System management loop

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    Figure 5-13 Historical world annual

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    Figure 7-19 Decision path for ITS m

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    Figure 10-3 Summary of differences

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    1. A large commercial aircraft maki

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    made to the system are often not on

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    From the MIT Engineering Systems Di

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    enterprise, the enterprise itself m

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    system capable of coping with uncer

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    Ch. 2Ch. 3Ch. 4Ch. 7Ch. 5Ch. 8Ch. 6

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    applicability of the framework. Fin

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    Myers, S. (1977) Determinants of Ca

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    FindingsFigure 2-1 Research process

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    • Difficult to predict future beh

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    As is apparent in the literature, t

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    of these. Ideally, either with the

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    do not appear to be mutually exclus

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    The ability for a system to activel

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    price (the option price) for the fl

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    and the results can be easier to ex

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    For some real options this appears

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    there is value to waiting to see wh

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    2.5 REAL OPTION PROCESSESExisting p

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    option is then evaluated with a “

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    • Option to engage in exploration

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    elatively straight-forward and are

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    OptionComplexityReal option in syst

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    2.8 REFERENCESAllen, T. et. al. (20

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    Hayes, R. and D. Garvin. (1982) Man

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    Ross, A. (2006) Managing Unarticula

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    3 LIFE-CYCLE FLEXIBILITY (LCF) FRAM

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    3.1 OVERVIEW OF NEED FOR LIFE-CYCLE

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    Figure 3-3 Condensed version of the

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    level, the appropriate enterprise n

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    3.1.2.1 Conceiving an OptionThe abi

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    3.1.2.2 Design and Evaluation of Op

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    option holder can not exercise the

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    system’s underlying structure and

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    3.2.2 DECISION TO USE LCF FRAMEWORK

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    Figure 3-11 Integration of decision

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    ounded rationality is not an issue,

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    quantitative analysis chapters, Sec

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    meantime, the land now would have d

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    3.2.5 DESIGN STRATEGY FOR OPTION EX

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    anticipated that external political

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    Figure 3-16 illustrates how the str

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    3.2.6 MANAGING THE SYSTEMManaging t

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    System Management LoopFigure 3-17 S

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    System Management LoopSystemImpleme

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    Long-term Management Loop ofUnknown

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    Long-term Management Loop of Unknow

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    Enterprise Readiness is included as

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    Figure 3-23 Condensed LCF Framework

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    3.4 REFERENCESAllen, T. et. al. (20

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    4 FLEXIBILITY IN BLENDED WING BODY

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    4.1.1 THE EARLY YEARSAfter the firs

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    Figure 4-2 Sikorsky S-42 Flying Boa

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    The 1950’s saw aircraft shift fro

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    to the government for doing so, wou

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    Figure 4-7 European supersonic civi

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    While airlines compete on a variety

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    Figure 4-11 Comparison of several l

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    Figure 4-12 Foreign and domestic so

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    Figure 4-14 Drawings from Leonardo

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    shifting their body weight) to the

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    Figure 4-19 Semi-monocoque construc

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    With a bi-wing (or tri-wing) constr

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    Figure 4-24 Loads and lifts generat

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    Figure 4-25 747-8, showing both loc

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    Additional benefits of the BWB arch

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    4.4.1 BWB OPTION DECISION PATHSFor

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    lower costs, higher scales of econo

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    Miller, B. (2005) A Generalized Rea

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    5 VALUE OF FLEXIBILITY IN BLENDED W

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    This chapter is composed of three m

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    this research were deemed necessary

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    For clarity of discussion, a high l

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    model, a better understanding of co

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    An overview of each of these subsys

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    important and may make inroads into

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    Figure 5-9 Airline finances and pro

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    Figure 5-10 Airline profitability,

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    Product design is based on a trade-

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    The airframe manufacturer productio

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    $70Inflation Adjusted Crude OilPric

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    5.2.5 MODEL VALIDATIONThe system dy

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    Forecast data (all planes)Model dat

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    5.3.1 INHERENT BENEFITSBWB technica

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    minor differences between aircraft

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    The remainder of this section looks

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    derivative depends on corporate str

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    Table 5-1 Number of derivatives lik

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    LowFuelCosts35%30%HighFuelCostsProb

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    The results presented can be interp

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    Compared to the Boeing 787, the dev

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    than a European option, because of

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    In the opposite case where the BWB

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    Because of the consequences of exer

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    35%30%Probability25%20%15%10%5%0%$-

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    BWB does not seem to offer advantag

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    type plane, relative to conventiona

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    5.4 REFERENCESAirbus. (2006) Annual

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    6 CHALLENGES OF FLEXIBILITY IN BLEN

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    FindingsFigure 6-1 Case study analy

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    Figure 6-2 Characteristics of case

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    6.1.3 INTERVIEWEE SELECTIONAs the i

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    Table 6-2 ITS case study organizati

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    about flexibility, i.e. is it a goo

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    2. If flexibility is used, can you

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    case with BCA, which has embraced a

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    primarily through military and NASA

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    Figure 6-7 Delivery and market fore

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    to meet rising demand, the overall

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    Another option widespread in the ai

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    design, evaluate or manage flexibil

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    Interviewee views on flexibility ce

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    and evaluations are based around th

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    operating and maintenance costs by

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    when fuel costs increased substanti

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    options, such as cross-program deri

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    6.9 REFERENCESAirbus. (2007) Produc

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    7 FLEXIBILITY IN HOUSTON GROUNDTRAN

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    Figure 7-2 Characteristics of case

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    cases can be added to existing or n

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    7.2.2 STANDARD ITS TECHNOLOGIES AND

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    • increased opportunities for pri

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    for Inherently Low Emitting Vehicle

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    Marker 2005). This type of cross fu

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    Figure 7-4 Plastic pylon separated

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    ecause the network of sensors can t

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    operating conditions. Additional ro

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    DSRC based system would require a l

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    Houston has already deployed one of

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    Figure 7-13 Transit center location

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    Figure 7-15 Houston’s managed lan

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    as HOT or TOT lanes. This can be es

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    BuildtraditionalinfrastructureDelay

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    HOT / BRTlaneNon-flexibleTOT / BRTl

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    BuildtraditionalinfrastructureDelay

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    or improved safety functions could

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    Haning, C. and W. McFarland. (1963)

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    8 VALUE OF FLEXIBILITY IN HOUSTON G

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    attempt was made to completely repr

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    Figure 8-4 Quantitative analysis pr

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    8.2.1.1 Travel Demand ModelingThe t

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    ange of traffic analysis studies to

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    I-10 KatyFreewayI-610(innerloop)Bel

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    5 lanesFigure 8-10 Example of satel

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    Beltway 8(secondary loop)I-610 (inn

  • Page 315 and 316: 8.2.2.5 Major Modeling AssumptionsD
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  • Page 323 and 324: From the analysis above, with the d
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  • Page 345 and 346: Table 8-10 Summary of ITS case stud
  • Page 347 and 348: Similar to the above discussion of
  • Page 349 and 350: 9 CHALLENGES OF FLEXIBILITY IN HOUS
  • Page 351 and 352: new challenges as well as increase
  • Page 353 and 354: 9.2 QUALITATIVE ANALYSIS PROCESSPre
  • Page 355 and 356: The qualitative research methodolog
  • Page 357 and 358: to be able to answer the research q
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  • Page 365: • Increased data sources - The no
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  • Page 373 and 374: 9.3.2.3 State Legislators and Gover
  • Page 375 and 376: met with business interests before
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  • Page 389 and 390: The federal level interviewee conti
  • Page 391 and 392: may not be tied to a physical proje
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  • Page 397 and 398: Monitor/ManageFigure 9-16 Summary o
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  • Page 409 and 410: • Mechanism for creating pressure
  • Page 411 and 412: 9.9.2.2 Uncertainty as a Result of
  • Page 413 and 414: option purchase price. This was bec
  • Page 415 and 416: 9.10 REFERENCESABC7. (2004) Chicago
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    Judd, D. and T. Swanstrom. (2004) C

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    10 FINDINGS AND CONCLUSIONSChapter

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    concerns the use of real options

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    Table 10-1 Summary of major researc

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    to a system. Rather, these options

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    future option exercise can prevent

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    Q1-2. The case studies provided a d

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    Currently, the Silver Line right-of

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    technical system as well as the soc

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    In the ITS case study, the transpor

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    system that the technical system is

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    option exercise unlikely (building

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    some future date. This type of wast

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    DesignPhaseEvaluationPhaseManagemen

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    ITS capabilities used to create the

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    technical and social components of

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    incorporated directly into the mode

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    As defined in Section 2.6, the diff

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    In the BWB case study, an enterpris

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    For “standard” real options it

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    “Standard” real options are des

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    From the research it was found that

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    d. Evaluating the option with quant

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    need for the system is, while simul

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    10.7 REFERENCESClemons, E. and B. G

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