A COST-BASED DEFENSE DECISION APPROACH IN VOLATILE ENVIRONMENT Cover Image

A COST-BASED DEFENSE DECISION APPROACH IN VOLATILE ENVIRONMENT
A COST-BASED DEFENSE DECISION APPROACH IN VOLATILE ENVIRONMENT

Author(s): Cătălin Cioacă
Subject(s): Economy, Public Finances, Accounting - Business Administration
Published by: Regional Department of Defense Resources Management Studies
Keywords: volatile environment; real option analysis; decision making; crisis cycle; stochastic life cycle cost;

Summary/Abstract: The paper captures the effect of uncertainties from the security environment on the investment decision in equipment purchase or modernization. Partial irreversibility and limited flexibility specific to military decisions create the context for the introduction of opportunity cost into the analysis. The problem of defense resource allocation is analyzed based on the principles of complex system engineering. The design of allocation strategies is analyzed by integrating dynamic defense capabilities through the paradigm of real option analysis. Based on obtained results, the strategic decision maker can better understand the spectrum of possible solutions and how to act in case of major shocks.

  • Issue Year: 15/2020
  • Issue No: 15
  • Page Range: 77-86
  • Page Count: 9
  • Language: English