21Product Mix Flexibility: This Chapter Presents the Option to Change Product Mix, and Examines the Effect of Volatility on Option Value

This chapter focuses on a different type of flexibility—a product option as distinct from a timing option. We look at the flexibility to change the mix of products—specifically, to switch production between different types of buildings.

We see that product mix flexibility is essentially different from the timing options. It is not merely defensive in nature, but also offensive. Product mix flexibility is thus not redundant to the timing options, as the timing options are among themselves, as we saw in ...

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