Real Options as Engines of Choice and Heterogeneity

Four different concepts of real options are prevalent in the literature: 1) option value as a component of the total value of the firm; 2) a specific investment with option-like properties; 3) choices that might pertain to one or more of such proposals; and 4) the use of options reasoning as a heuristic for strategy. A point in common across definitions is that option value derives from two properties of an investment: future choices and the potential for proprietary access to the outcome for the investing firm.