Fleeting Opportunities PDF Download

This dissertation is concerned with the study of problems that involve fleeting opportunities. These are situations with limited capacity and a stream of opportunities on which the decision maker must decide whether to capitalize as they occur. One example is the evaluation of business proposals by Venture Capitalists (VC). I have developed a process to help decision makers in such situations set their policies and answer valuation questions. In the VC context, this process helps evaluate the firm itself or the value of a partner in hiring/firing situations. It can also help the organization's decision makers determine the value of information-gathering activities for different deals at different situations. Our solution is based on three steps. In the first, we assess the frame and decision basis. In the second, we build the valuation funnel. In the third, we apply the results of the valuation funnel to decisions regarding the deal flow and specifically to deals as they arrive. We assume that the risk preference of the decision maker follows a linear or an exponential utility function. We formulate the generic problem in the valuation funnel as a dynamic program wherein the decision maker can either accept a given deal directly, reject it directly, or seek further information on its potential and then decide whether to accept it or not. This approach is illustrated in this dissertation through several examples. Our results show well-behaved characteristics of the optimal policy, deal flow value, and the value of information and other alternatives over time and capacity. To enable these results, we developed the power u-function further and defined a u-value multiplier and certain equivalent multipliers. We also studied different approximations for the power u-curve based on few moments of the underlying distribution. The system we created gives a valuation template for the fleeting opportunities problem. This template allows decision makers to address single opportunities as they occur and guides their approach to the deal flow as a whole. We believe this template will help to extend the application of Decision Analysis and spur more research within the fleeting opportunities problem and, more generally, valuation problems. Our process allows us a valuation template for problems fitting the fleeting opportunities description. This, we hope, will extend the use of Decision Analysis into new fields.