ABSTRACT
Engineering systems are always designed, developed, and operated in uncertain economic conditions, for example supply, demand, or prices. These are usually aggregated as a project’s “market” or “economic” risk, which is usually crucial to its economic outcome. Moreover, the exposure of a project’s success to these economic uncertainties largely derives from technical design decisions. These often determine raw material, product and process specifications, demand limits, and capacity constraints, so that they affect a system’s economics through its life cycle. Fixed-point designs are rigid in defining these specifications; flexible designs enable the designer, developer, or operator to actively manage or further evolve the configuration of the system downstream, so as to adapt to changes in the economic environment: they create real options.
