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Table of Contents

1 Introduction
2 Definition of Flexibility
3 Valuing Flexibility
4 Applications of Flexibility
5 Decision Analysis
6 Option Pricing
7 Hybrid Valuation Methods
8 Life Decisions
9 Consumer Decisions
10 Energy Markets
11 Conclusions and Guidelines
Web Resources


The decision of indecision and other dilemmas, Le Bon Journal newsletter, Vol. 2, Issue 4, 2 page PDF

Decision making workshop - Saturday 18 September 2004 London
Contact Dr Anne Ku for details


Book based on my PhD and subsequent work experience.

Decision Making for Flexibility

by Anne Ku

See my toastmaster speech on DECISIONS for a layman’s introduction

Everyone - no one should be excluded, although readers most interested would be those that would use flexibility.

Why would anyone want to read this book:
Everyone makes decisions. However, the education on decision making and decision analysis does not consider flexibility. Decision makers do consider flexibility. In the face of (increasing) uncertainty, flexibility is useful. Too much flexibility can cause distress. In the finance literature, flexibility is valued in option pricing theory. As such, it is embedded in financial instruments to hedge against market uncertainty and other types of risk. The convergence of decision analysis and option pricing in the valuation of flexibility has been studied only in the last 5 years.

We can broadly categorise non-trivial multi-attribute decisions into two types: inanimate object which does not respond back vs. animate objects.  The former include buying house, car, PC, stereo, and anything else that is quite complicated.  The latter include choice of life-long partner, job, neighbourhood to live in, and anything else that will affect future decisions.  In both categories there is a time dimension, desire for reversibility (i.e. to back out), and desire to delay commitment.

Writing style:
Plain English for the non-expert, with many diagrams.

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