Adaptive behaviour with risk

Produce an essay on adaptive behaviour with risk. This is more focused on economics rather than financial or management.
Explain the following in regards to the pharmaceutical industry:
Adaptive behaviour with risk,
Options to delay, expand and abandon
Cost benefit analysis- QALY
we learn from observing and adapting our behaviour to increase our potential upside from the investment and to decrease the possible downside

Use the decision tree scenario in (figure 8.1) (figure 8.2) (from ‘Strategic Risk Taking: A Framework for Risk Management by Aswath Damodaran’ chapter 8) to answer what is it about the second decision tree that makes a potentially bad investment (in the first tree) into a good investment (in the second)? How do you value investments cost benefit analysis on life. QALY
The decision tree should be included changing the numbers would be preferred.

Also
‘The rule “invest if benefits exceed costs” does not properly account for the option value of waiting. Simulations show that this option value can be significant, and that for surprisingly reasonable parameter values it may be optimal to wait until benefits are twice the investment cost’ ( the value of waiting to invest Robert L. McDonald, Daniel Siegel)
Use pharmaceutical industries as an example:
Essential reading
• Strategic Risk Taking: A Framework for Risk Management by Aswath Damodaran
Book can be found

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/valrisk/book.htm

focus on 1-4 and chapter 8 especially

• The Value of Waiting to Invest Robert L. McDonald, Daniel Siegel