Strategic Options and Expert Systems: A Fruitful Marriage

Soft Computing, Vol. 8, No. 3, pp. 179-192, 2004

20 Pages Posted: 15 Nov 2009  

Carlo Alberto Magni

University of Modena and Reggio Emilia - Department of Economics

Giovanni Mastroleo

Università degli Studi della Calabria

Marina Vignola

Università degli studi di Modena e Reggio Emilia (UNIMORE)

Gisella Facchinetti

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics

Date Written: 2004

Abstract

Business economics does not provide any methodology for appraising strategic investments, relying on informal approaches. Conversely, financial economics offers us plenty of sophisticated mathematical models unsuitable for applications and based on unrealistic assumptions. This paper presents an example of how strategic investments may be handled with a formal but easy-to-undersand tool. While this paper shows a specific application, a real-life case, we think the model here proposed may be generalized, so contributing to developing a new approach to business decisions. In particular, we think of a fuzzy expert system approach as a convenient tool overwhelming many of the shortcomings inherent in the “crisp” approaches of the financial literature (DCF methods, options pricing, dynamic programming), while avoiding at the same time the refusal of any methodology (typical of business economics). The idea here presented develops some results by Magni et al. (2001) and Facchinetti et al. (2001). An evaluation function is drawn up via “if-then” rules; the latter are made to work automatically by means of an expert system, which adequately replicates the evaluation of human experts. A sensitivity analysis is presented to test the soundness of the model.

Keywords: strategic, real options, fuzzy expert system, sensitivity analysis

JEL Classification: C63, C67, C88, D81, G11, G31

Suggested Citation

Magni, Carlo Alberto and Mastroleo, Giovanni and Vignola, Marina and Facchinetti, Gisella, Strategic Options and Expert Systems: A Fruitful Marriage (2004). Soft Computing, Vol. 8, No. 3, pp. 179-192, 2004. Available at SSRN: https://ssrn.com/abstract=1505399

Carlo Alberto Magni (Contact Author)

University of Modena and Reggio Emilia - Department of Economics ( email )

Viale Berengario 51
Modena, Modena 41121
Italy

Giovanni Mastroleo

Università degli Studi della Calabria ( email )

Italy

Marina Vignola

Università degli studi di Modena e Reggio Emilia (UNIMORE) ( email )

Viale A. Allegri 9
Modena, Modena 42121
Italy

Gisella Facchinetti

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41100 Modena, Modena 41100
Italy

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