Real option valuation on grid computing

Grid computing essentially involves transparent access to distributed computing where computing resources are pooled and shared both within and among organizations. Grid computing is increasingly becoming a viable option for businesses looking for high-end computing requirements for relatively short...

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Bibliographic Details
Published in:Decision Support Systems 2008-12, Vol.46 (1), p.333-343
Main Authors: Zhang, Juheng, Bandyopadhyay, Subhajyoti, Piramuthu, Selwyn
Format: Article
Language:English
Subjects:
Algorithmics. Computability. Computer arithmetics
Applied sciences
Computer science
control theory
systems
Computer systems and distributed systems. User interface
Decision theory. Utility theory
Distributed processing
Exact sciences and technology
Firm modelling
Grid computing
Monopolies
Monte Carlo simulation
Operational research and scientific management
Operational research. Management science
Real option valuation
Real options analysis
Software
Studies
Theoretical computing
Uncertainty
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Summary:Grid computing essentially involves transparent access to distributed computing where computing resources are pooled and shared both within and among organizations. Grid computing is increasingly becoming a viable option for businesses looking for high-end computing requirements for relatively short periods of time. We analyze some economic decision criteria for a grid computing provider wishing to provide such a service to businesses. Given the large amount of uncertainty in prices and demand (which is demonstrated through Monte Carlo simulations) for such a service, a real options valuation technique is particularly suitable for such an exercise. We study the dynamics of grid computing from an economic perspective. Specifically, we consider a monopolist scenario providing two kinds of service, one of which might preempt the other.
ISSN:0167-9236
1873-5797
DOI:10.1016/j.dss.2008.07.003