Real Options, Conflicting Valuations, and Favoritism : Topics in Economic Analysis & Policy uses cookies, tags, and tracking settings to store information that help give you the very best browsing experience.
To understand more about cookies, tags, and tracking, see our Privacy Statement
I accept all cookies for the De Gruyter Online site

Jump to ContentJump to Main Navigation

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Zulehner, Christine / Schirle, Tammy

IMPACT FACTOR 2014: 0.336
5-year IMPACT FACTOR: 0.848

SCImago Journal Rank (SJR) 2014: 0.633
Source Normalized Impact per Paper (SNIP) 2014: 0.606
Impact per Publication (IPP) 2014: 0.640


30,00 € / $42.00 / £23.00

Get Access to Full Text

Real Options, Conflicting Valuations, and Favoritism

Anil Arya1 / Jonathan Glover2

1Ohio State University,

2Carnegie Mellon University,

Citation Information: Topics in Economic Analysis & Policy. Volume 3, Issue 1, ISSN (Online) 1538-0653, DOI: 10.2202/1538-0653.1177, December 2003

Publication History

Published Online:


In this paper, limited managerial capacity gives rise to a timing option: agents can implement projects now-or-later. Because each agent cares only about the project he implements, while the principal cares about the projects undertaken in aggregate, the timing option may be valued differently by the principal and the agents. Under a fair assignment rule (one that treats the agents symmetrically), these conflicting valuations result in agents sometimes not implementing the principal's desired projects. We identify conditions under which the optimal assignment rule necessarily exhibits favoritism. Favoritism is beneficial because it provides appropriate incentives to the unfavored agent by reducing his option value of waiting.

Keywords: timing option; favoritism

Comments (0)

Please log in or register to comment.