A Review of the Applicability of Classical and Extension of Fuzzy Logic Approaches to Project Decision-Making using Real Options

Real options theory allows taking into account the value of some sources of managerial flexibility and therefore assessing more accurately a project value. The positive value of flexibility results from limiting the impacts of adverse events while taking advantage of positive ones. One of the main lessons is that uncertainty adds value in the presence of flexibility. Ambiguous parameters that have a significant effect on the project value are usually represented as fuzzy sets using Zadeh’s classical theory of Fuzzy logic” (also termed as “type-1”). However, there have been so many derivatives and expansions of the fuzzy set theories developed by different researchers. This paper reviews the applicability of ROA to fuzzy sets (classical and extended) implementation to decision-making for large projects where project timing and uncertainty are key parameters affecting the project value. The objective of this review is to identify the research gap as well as provide an elementary guide of the applicability of such techniques.