Real options and incentives

Abstract

Efficient management of a real option involves establishing the convenience of undertaking a proyect with uncertain benefits versus deferring decisionand waiting for new useful information to appear and uncertainty to dissapear. Frequently, this decision is based on the recommendation of an expert, with the ability to determine the benefits of the proyect if it is undertaken. In this paper we analyze the optimal contract that the owner of the real option should propose to the expert in order to give her incentives to use costly resources in order to acquire useful information, and to make a recommendation which is consistent with the information acquired.