Xiaolingtong versus 3G in China: Which will be the winner?

Xiaolingtong (XLT), a new type of mobile phone system based on PHS technology for wireless access of fixed-line telephone networks, has grown very rapidly in China. However, there are many doubts about the future of XLT once 3G (the third generation of mobile communication) is finally employed. This paper proposes a theoretical framework to assess and compare XLT and 3G from four perspectives: technology, market demand, business models and government policy. It concludes that XLT and 3G will coexist with existing 2G/2.5G mobile communication networks for a considerable period of time. With service collaboration and integration, the coexistence of both of these technologies can enhance China's mobile communication infrastructure and support the growth of mobile commerce.     

Making real options work for practitioners: a generic model for valuing R&D projects

We propose a generic valuation framework for the appraisal of R&D projects based on real option theory. The added value of this approach is the presentation of a model that was implemented in a manner that allows corporate decision makers to use real options in an intuitive and standardized way. The project valuation procedure is separated into three main phases: project modeling, data and input collection, and result generation and analysis. The project model represents the structure of the real world R&D project with its investments, expected results, and decisions that need to be taken conditionally on the outcomes of research activities. The project model is represented in the form of a decision tree, where different research results or taken decisions lead to new branches. In this way, every possible situation the project can pass through can be represented. Uncertainties are separated into market uncertainties (e.g., market prices) and project specific, private uncertainties (e.g. uncertainty of research results). For both uncertainties, event trees are constructed which are then combined and merged with the above mentioned decision tree in order to represent the value evolution of the R&D project under given decisions and uncertainties. For every possible state of the project the real option value is calculated. By creating multidimensional trees, a multitude of decision steps and various kinds of real options (e.g., continue, expansion, switch, abandonment) can be modeled. The calculation complexity for the decision trees is given. From the tree structure we can calculate the real option value of starting an R&D project, i.e., the value of undertaking the first investment and thus acquiring the subsequent decision opportunities given by the completion of the first research effort. Furthermore, the optimal exercise strategy is derived from the decision tree. The exercise strategy gives the manager the possibility to have an a priori overview of where an R&D project may lead to, which decisions need to be taken in which circumstances, and when the project needs to be stopped in order not to generate losses. In an in‐depth case study we use an illustrative R&D project to set up and discuss the three phases of project modeling in the real options framework: building the multidimensional decision tree, input generation, and calculation of the real option value as well as the optimal strategy for the R&D project.     

Expanding mobile wireless capacity: The challenges presented by technology and economics

As demand for mobile broadband services continues to explode, mobile wireless networks must expand greatly their capacities. This paper describes and quantifies the economic and technical challenges associated with deepening wireless networks to meet this growing demand. Methods of capacity expansion divide into three general categories: the deployment of more radio spectrum; more intensive geographic reuse of spectrum; and increasing the throughput capacity of each MHz of spectrum within a given geographic area. The paper describes these several basic methods to deepen mobile wireless capacity. It goes on to measure the contribution of each of these methods to historical capacity growth within U.S. networks. The paper then describes the capabilities of 4G LTE wireless technology, and further innovations off of it, to further improve network capacity. These capacity expansion capabilities of LTE-Advanced along with traditional spectrum reuse are quantified and compared to forecasts of future demand to evaluate the ability of U.S. networks to match future demand. Without significantly increasing current spectrum allocations by 560 MHz over the 2014–2022 period, the presented model suggests that U.S. wireless capacity expansion will be inadequate to accommodate expected demand growth. This conclusion is in contrast to claims that the U.S. faces no spectrum shortage.     

TECHNIQUES OF TRANSPORT PLANNING by John R. Meyer,Editor

This case study is an evaluation of actual alternatives for capacity expansion of an electrical power company. A systematic analysis of the important parameters of this complex problem is described to illustrate how multiple attribute decision analysis can be utilized to include the monetary and nonmonetary aspects of such a real world capacity expansion problem. The service cost data utilized is the type generated routinely by utilities and/or regulatory staffs. However, the use of outage costs and socio-economic coats demonstrates that the readily available service coats data can be expanded and combined into a framework that allows a more detailed analysis of the complex, capacity planning problem. The information reported here has been altered to the extent necessary to conceal the identity of the utility.     

Internet of things and the economics of 5G-based local industrial networks

Fifth generation (5G) networks raise governance and management challenges that did not exist in 3G and 4G wireless technologies. Advanced wireless functionality enables new applications and services based on smart, physical, network infrastructures, many of them expected to be localized. As a general-purpose technology, 5G can be configured in numerous ways to support innovative applications across many sectors. Smart network applications and services must integrate physical and virtual components in innovative ways. In addition, general capabilities of 5G must be combined with complementary technologies, such as big data analytics and edge cloud services, to create services for specific use cases. Varying throughput and latency requirements of distinct use cases require differentiated technical solutions. Appropriate frequencies must be aligned efficiently with other features within the footprint of particular, local industrial networks. National policy makers, suppliers, and users are responding differently to these governance and management challenges. These approaches balance differently the trade-offs between experimentation, differentiation, and harmonization. Comparative analysis can inform gradual improvements of the governance of 5G-based, local industrial networks.     

Applying a system concept to R&D management

The author has long been an advocate of the systems approach to forecasting, particularly in the area of resource allocation. In making a number of seminar presentations to middle and senior management, both in the U. K. and the U. S. A., questions from the floor revealed that systems thinking is not as widespread as had been believed. While the media's past attention to the ‘Limits of Growth’ (Meadows, 1972) has communicated the impossibility of infinite expansion, many decision makers remain unaware of the closed-loop characteristics of the systems in which they work. On the contrary. While activities are often seen as the prime raison d'etre, the nature and origin of the driving force is often mis-interpreted and the modifying feed-back controls completely ignored. This paper, therefore, attempts to show that a basic closed-loop system is the only rational precursor to methodology development for decision making. If this action reveals the genuine system parameters then the researcher may well be performing his most helpful service to the decision maker.     

TD向前冲

奥运的"高压锅"近期大幅推动了TD的发展,但奥运结束后很多问题也会浮出水面。"奥运期间一定能够提供3G服务!"中国政府许下的承诺,终于在某种程度上兑现了。     

Real options in divestment alternatives

This paper examines the implications of real options theory for both the decision to divest a business unit and the mode of divestment. It is shown that the decision to divest a business unit and the decision to engage in staged modes of divestment are both sensitive to uncertainty, consistent with a real options logic. However, in the face of uncertainty, the results suggest that staged forms of governance create real options that are of lesser value as compared to simply not divesting a business unit and also as compared to completely divesting a business unit. Thus, this study shows that firms have real options of varied value to choose from in the context of divestments. Copyright © 2014 John Wiley & Sons, Ltd.     

Revisiting Wireless Internet Connectivity: 5G vs Wi-Fi 6

In recent years, significant attention has been directed toward the fifth generation of wireless broadband connectivity known as ‘5G’, currently being deployed by Mobile Network Operators. Surprisingly, there has been considerably less attention paid to ‘Wi-Fi 6’, the new IEEE 802.1ax standard in the family of Wireless Local Area Network technologies with features targeting private, edge-networks. This paper revisits the suitability of cellular and Wi-Fi in delivering high-speed wireless Internet connectivity. Both technologies aspire to deliver significantly enhanced performance, enabling each to deliver much faster wireless broadband connectivity, and provide further support for the Internet of Things and Machine-to-Machine communications, positioning the two technologies as technical substitutes in many usage scenarios. We conclude that both are likely to play important roles in the future, and simultaneously serve as competitors and complements. We anticipate that 5G will remain the preferred technology for wide-area coverage, while Wi-Fi 6 will remain the preferred technology for indoor use, thanks to its much lower deployment costs. However, the traditional boundaries that differentiated earlier generations of cellular and Wi-Fi are blurring. Proponents of one technology may argue for the benefits of their chosen technology displacing the other, requesting regulatory policies that would serve to tilt the marketplace in their favour. We believe such efforts need to be resisted, and that both technologies have important roles to play in the marketplace, based on the needs of heterogeneous use cases. Both technologies should contribute to achieving the goal of providing affordable, reliable, and ubiquitously available high-capacity wireless broadband connectivity.     

Flexible spectrum management for mobile broadband services: How does it vary across advanced and emerging markets?

Demand for wireless data and Internet services are expected to grow exponentially, both in advanced and emerging markets in the near future. While advanced countries have often used centralized planning and coordination methodology to forecast and allocate the associated spectrum blocks to wireless operators for meeting the demand, it is often ad-hoc in emerging markets dictated by market forces. In this paper, Finland and India are taken to represent advanced and emerging markets, respectively. Different policy options and the policy environment in these two countries for spectrum management are explored. A causal model is constructed to represent the different variables that affect spectrum management practices and possible paths forward in these two extreme cases are highlighted. Using the causal model structure, it is hypothesized that (i) the matured markets such as Finland that practice centralized and harmonized spectrum planning are likely to continue their ex-ante policies and opt for the release of digital dividend spectrum and use of spectrally efficient technologies; (ii) the emerging market in India that is characterized by a market oriented ex-poste regulation is a good candidate to introduce secondary markets including flexible opportunistic spectrum access as exemplified by the wide spread adoption of multi-SIM handsets and the practice of national roaming by 3G service providers. Introductions of policies and regulations in these markets to break away from the extant paths are also highlighted.     

Multi-Criteria Analysis of Grid Expansion Concepts on the Low Voltage Level

In recent years, the power generation and consumption in Germany have undergone fundamental changes. New political regulations and the renewable energy law have resulted in a sharp increase in the installed generation capacities of photovoltaics connected to a low voltage grid. Distribution system operators are faced with the challenge of preventing grid component overload as well as a violation of voltage range. Due to increasing requirements of grid expansion in future years, distribution system operators must evaluate new expansion concepts compared to conventional ones. One interesting approach is the installation of Voltage Regulated Distribution Transformers (VRDT) regulating the voltage level of distribution grids. In this paper, the local network of one of the largest German distribution system operators is analysed in the context of future requirements for grid expansion using the conventional and VRDT expansion. Grid structures have grown over the last decades and therefore vary widely in their grid topologies. A classification of the entire grid in a few classes results in high inaccuracies. Therefore, the creation of synthetic grid structures is developed for the calculation of the required network extension. In addition, both grid expansion concepts are evaluated not only for financial aspects, but against environmental, economic, technological, and social dimensions using a multi-criteria decision making approach. The study shows a high market potential for VRDTs in low voltage grids with an increasing enforcement level of photovoltaics.     

Exploring the potential of wireless technologies to accelerate universal Internet access in Ghana

Ghana was one of the first countries in sub-Saharan Africa to be connected to the Internet, yet has very low Internet usage (5.3 users per 100 inhabitants). A qualitative study including in-depth interviews with ISPs explored Internet diffusion in Ghana. Findings suggest that due to Ghana's inefficient and outdated fixed-line infrastructure, universal Internet access goals might not be achievable through fixed-line technologies. Rather, wireless technologies may be more efficient. However, high access costs continue to be a barrier. Policy options to encourage widespread deployment of wireless broadband and cost reduction are presented as suggestions for further research. These include using universal service funds to expand the national backbone with an open access high capacity wireless backbone to reach unserved and underserved areas, reducing license and regulatory fees for the wireless industry to encourage coverage and capacity expansion, and mandatory infrastructure sharing to reduce cost.     

On a general periodic preventive maintenance policy incorporating warranty contracts and system ageing losses

In this paper, a general periodic preventive maintenance (PM) policy for a repairable revenue-generating system is developed and studied. We define ‘ageing losses’ as the difference in revenues generated by an ideal system (no ageing) and a real system that ages over the same period of consideration. It is assumed that preventive maintenance slows the system deterioration process and therefore reduces ageing losses. The proposed model is general in the sense that (1) both the warranty contracts and system ageing losses are incorporated in the maintenance cost modeling and (2) the implementation of PM actions does not have to be strictly periodic. A cost model is developed for the buyer under two decision variables—the calendar time of the first PM and the degree of each PM. Numerical examples are then presented to show the effectiveness of the proposed model. Sensitivity analyses are further conducted to investigate the impact of model parameters on optimal solutions.     

MAKING USE OF REAL OPTIONS SIMPLE: AN OVERVIEW AND APPLICATIONS IN FLEXIBLE/MODULAR DECISION MAKING

This article focuses on how the use of real options can be made simple, providing an overview of the power of flexible and modular decision making and its use in various applications across industries. After common real options are discussed through a comprehensive example, the article reviews the key lessons and implications of real options thinking for flexible decision making. It then proceeds to propose a modular problem structuring approach that allows simplifying of complex real option problems by decomposing them into a few basic building-block option types (reviewed) connected by some basic decision operators. The resulting problem-structuring option map is depicted in a range of illustrative applications in various industries. Past areas of application of real options as well as research challenges ahead are also discussed.     

On Option-Pricing Models in Real Estate: A Critique

This paper considers the problems peculiar to options on real estate, because of the special set of institutional factors influencing real estate markets. It is intended to serve as a reply to Johnson and Wofford [15] as well as provide an overall critique of option-pricing models in a real estate context. Our major point is that a variety of real estate decisions, such as the abandonment decision, the option to refinance, or the option to exercise a contingent real estate purchase contract, may be modeled using option-pricing techniques. However, both the theoretical and institutional aspects of real estate markets must be taken into account in both developing and applying option models in a real estate context.     

RELATIVE RISK CHARACTERISTICS OF ROLLING HORIZON HEDGING HEURISTICS FOR CAPACITY EXPANSION

This paper applies measures of risk to capacity expansion decisions made under uncertainty. Eight different decision making rules are constructed by varying both the frequency of the forecast updates and the hedge against uncertainty in a rolling horizon heuristic procedure. Using demand, capacity, and cost data from the utility division of a manufacturing company, the risk characteristics of each decision making rule are evaluated by simulation. The results indicate that annual forecast revisions hedged by ninety percent prediction limits are preferred over decision rules with less frequent forecast revisions or fixed-width hedges.     

Decision‐making in the pharmaceutical industry: analysis of entrepreneurial risk and attitude using uncertain information

The main purpose of this study was to investigate judgments made by employees from the pharmaceutical industry and allied health‐care sectors in a set of four different drug discovery and development cases derived from real scenarios. Each case study related to go/no‐go decisions taken from various steps in drug discovery through preclinical and clinical development (investigational new drug) on to market introduction (new drug application) and treatment of the target population. Using a web‐based questionnaire, 52 respondents made five sets of judgment within each drug case whether to continue or halt further project development. For each case, additional details of the developmental scenario were disclosed to the respondent after completion of each judgment response. We also assessed to what extent the individual judgments given by the respondents were influenced by work experience and functional role, education, or their perceived entrepreneurial character. Our study demonstrates that health‐care employees differ substantially in their individual intuitive judgments of benefit and risk in go/no‐go decisions during the drug discovery and development process. This lack of coherence and wide variability with respect to the drug development cases selected may reflect judgment in the real world. Such judgments are usually taken from incomplete information, and individual decision‐making rules vary substantially between experts in the field. Further knowledge about this inherent human functional judgment variability may be helpful to form a better understanding of individual decision‐making in relation to inherent uncertainties. Additional research may also clarify how personal experience within drug discovery and development influences judgment and help to optimize decision outcomes in the drug development sector. Importantly, a deeper insight of the fundamentals and rules that shape individual and group decision‐making of everyday drug discovery and development may help to optimize the decision processes in the pharmaceutical industry.     

Toward a behavioral theory of real options: Noisy signals,bias, and learning

Research Summary: We develop a behavioral theory of real options that relaxes the informational and behavioral assumptions underlying applications of financial options theory to real assets. To do so, we augment real option theory's focus on uncertain future asset values (prospective uncertainty) with feedback learning theory that considers uncertain current asset values (contemporaneous uncertainty). This enables us to incorporate behavioral bias in the feedback learning process underlying the option execution/termination decision. The resulting computational model suggests that firms that inappropriately account for contemporaneous uncertainty and are subject to learning biases may experience substantial downside risk in undertaking real options. Moreover, contrary to the standard option result, greater uncertainty may decrease option value, making commitment to an investment path more effective than remaining flexible. Managerial Summary: Executives recognize the need to make uncertain investments to grow their business while mitigating downside risk. The analogy between financial options and real corporate investments provides an appealing method to consider the practical challenge of such investment decisions. Unfortunately, the “real options” analogy seems to break down in practice. We identify how a second form of uncertainty confounds real options intuition, leading managers to overestimate the value of uncertain investments. We present a behavioral real options model that accounts for both forms of uncertainty and suggest how uncertainty interacts with behavioral bias in the option execution/termination decision. Our model facilitates assessment of the conditions under which investments in uncertain opportunities are usefully considered as real options, and provides a means to evaluate their attractiveness.     

Revenue management for make-to-order manufacturing systems with a real-life application

Abstract

Due to successful applications of revenue management in the airline industry, in recent years, there has been a growing interest to adopt revenue management in make-to-order (MTO) manufacturing systems. Several interrelated decision problems such as order acceptance/rejection, short-term capacity planning, due date assignment, and order scheduling need to be studied simultaneously in order to manage revenues effectively in MTO manufacturing systems. Both the producer’s and customer’s requirements need to be taken into account through some negotiation mechanisms that are sensitive to the service-level reputation of the manufacturing companies. In this article, we propose a new dynamic bid price–based revenue management model that considers all of the aforementioned decision problems simultaneously. A simulation optimization approach is utilized in order to determine the best possible values of control parameters for bid price, due date assignment, and price increment/reduction mechanisms. The performance of the proposed integrated revenue management model is tested on both a hypothetical example and a real problem of a bridal gown company. The computational results show that the proposed model provides significant improvements in total revenue compared to other static and dynamic bid price policies.     

The derivation of R&D return indicators within a real options framework

The purpose of this paper is to rework the building blocks of real option applications and to introduce a basket option framework. We find that the characteristic parameters of the risk neutral density function implied in observed share prices within the real option framework represent a novel category of R&D return indicators. Empirical evidence for a set of 13 US bio-pharmaceutical companies is provided. The novel R&D return indicator can be used to analyse investor's expectations on R&D success of a particular firm. The implications of this indicator on decision making are mainly based on its information content on technological and market risk of the products under development in a particular firm. A proposal for a potential application of the stability index in innovation research is discussed as well. The study thus is at the interface between innovation research and (empirical) finance.