Evaluating RFID investments: A real options approach

Real options theory offers a suitable process to consider uncertainties and flexibilities in taking investment decision. This approach highlight options thinking into contemporary Radio Frequency Identification (RFID) project evaluation and management. In this chapter, we describe the options embedded in RFID investments and tools for quantifying option value. An application case is investigated to show the potential of options thinking and the real options methodology for evaluating and valuing the RFID investments. First, options associated with RFID investment are discovered in the case study. Then the RFID investment options are quantified. Finally, sensitivity analysis is conducted for different components of RFID investment such as initial investment and volatility. Based on the findings, an investment strategy for RFID technology has been found.