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Group-Managed Real Options
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DOI：10.1093/rfs/hhab100.png)
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Abstract
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We study a standard real-option problem in which sequential decisions are made through voting by a group of members with heterogeneous beliefs. We show that, when facing both investment and abandonment timing decisions, the group behavior cannot be replicated by that of a representative median member. As a result, members' disagreement generates inertia-the group delays investment relative to a single-agent case-and underinvestment-the group rejects projects that are supported by a majority of members, acting in autarky. These coordination frictions hold in groups of any size, for general voting protocols, and are exacerbated by belief polarization.
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