TY - GEN
T1 - A real options approach to hybrid electric vehicle architecture design for flexibility
AU - Kang, Namwoo
AU - Bayrak, Alparslan Emrah
AU - Papalambros, Panos Y.
N1 - Publisher Copyright:
© Copyright 2016 by ASME.
PY - 2016
Y1 - 2016
N2 - Manufacturers launch new product models at various time increments to meet changing market requirements over time. At each design period, product design and price may change. While price decisions can be made at product launching time, redesign decisions must be made in advance. Real options theory addresses such time gap decisions. This paper presents a real options approach with a binomial lattice model to determine optimal design and price decisions for hybrid electric vehicles (HEVs) that maximize expanded net present value of profit under gas price uncertainty over time. Results confirm that we can obtain changing vehicle attributes by changing gear ratios rather than the architectures themselves due to high cost of redesigning. A parametric study examines the impact of gas price volatility on option decisions and shows that larger volatility of gas price causes the change option to be selected more frequently.
AB - Manufacturers launch new product models at various time increments to meet changing market requirements over time. At each design period, product design and price may change. While price decisions can be made at product launching time, redesign decisions must be made in advance. Real options theory addresses such time gap decisions. This paper presents a real options approach with a binomial lattice model to determine optimal design and price decisions for hybrid electric vehicles (HEVs) that maximize expanded net present value of profit under gas price uncertainty over time. Results confirm that we can obtain changing vehicle attributes by changing gear ratios rather than the architectures themselves due to high cost of redesigning. A parametric study examines the impact of gas price volatility on option decisions and shows that larger volatility of gas price causes the change option to be selected more frequently.
UR - http://www.scopus.com/inward/record.url?scp=84993987836&partnerID=8YFLogxK
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U2 - 10.1115/DETC2016-60247
DO - 10.1115/DETC2016-60247
M3 - Conference contribution
AN - SCOPUS:84993987836
T3 - Proceedings of the ASME Design Engineering Technical Conference
BT - 42nd Design Automation Conference
T2 - ASME 2016 International Design Engineering Technical Conferences and Computers and Information in Engineering Conference, IDETC/CIE 2016
Y2 - 21 August 2016 through 24 August 2016
ER -