A decision to postpone a project until more information is available illustrates which real option?

• A. Option to follow on
• B. Option to abandon
• C. Option to delay
• D. Option to invest

Answer: (C)

Delaying is about holding off on making an irreversible investment until more information is available. This real option gives the manager the right, not the obligation, to invest later. In a world of uncertainty, postponing preserves flexibility and can add value by avoiding commitment to an option that might turn out to be suboptimal; as information improves, you can make a better-informed decision and potentially invest only if conditions look favorable. The option to delay becomes more valuable when there is a lot of uncertainty and the information that will reduce that uncertainty is time-dependent.

This isn’t an option to follow on (which would mean expanding after initial success), nor an option to abandon (which is about exiting if things go poorly), nor an option to invest (which is to commit now). The scenario specifically describes postponing the project to wait for more information, which is the delay option.