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Playing at AcquisitionsBehavioral Option Games$
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Han Smit and Thras Moraitis

Print publication date: 2015

Print ISBN-13: 9780691140001

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691140001.001.0001

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Option Games Valuation

Option Games Valuation

Chapter:
(p.123) Chapter 6 Option Games Valuation
Source:
Playing at Acquisitions
Author(s):

Han Smit

Thras Moraitis

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691140001.003.0006

Valuing uncertainty in strategy requires the development of quantitative models reflecting the conceptual options games view on strategy. The application of fresh ideas based on two major strands in the existing literature—real options and game theory—has attracted increased interest, both to academia and to acquisition strategy practitioners. Despite the mathematical elegance of option game models, the key metrics and tools for implementation have not yet been fully developed, especially with regard to providing relevant managerial guidance. This chapter presents an in-depth examination of Xstrata's Falconbridge acquisition through option and game lenses in order to provide insights into the implementation of these new and effective quantitative real option models in practice, as well as pointing out their limitations.

Keywords:   real options theory, game theory, acquisition strategy, option bidding, Xstrata, Falconbridge, option games

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