Real options and system dynamics approach to model value of implementing a project specific dispute resolution process in construction projects

This paper presents a methodology to study the effect of different resolution strategies on the value of the investment in a project-specific dispute resolution ladder (DRL) using option/real option theories from financial engineering, process centric modeling, and system dynamics methodology. Of particular interest in this paper is the integration of these research methodologies into a computer model to support the evaluation of the DRL investment in a particular construction project by taking into account the characteristics of: (1) the project, and (2) the different alternative dispute resolution (ADR) techniques chosen for the DRL implementation. Finally, an example is presented to illustrate the application of the computer model in a real construction project.

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