Which of these is a potential disadvantage of a real options approach?
A) Requires a project team to stick with a rigid plan that allows no deviation when new information becomes available
B) Involves only go-no-go options rather than potential for re-routing plans
C) Applies only to financial projects
D) Project teams can find it difficult to abandon or shift the direction of a project once they have invested their time and energy.
E) Does not allow for the opportunity to begin with a pilot project.

Question

Which of these is a potential disadvantage of a real options approach? 
A) Requires a project team to stick with a rigid plan that allows no deviation when new information becomes available
B) Involves only go-no-go options rather than potential for re-routing plans
C) Applies only to financial projects
D) Project teams can find it difficult to abandon or shift the direction of a project once they have invested their time and energy.
E) Does not allow for the opportunity to begin with a pilot project.

Quizplus · Accepted Answer

Real options approach allows for flexibility and adaptation, including the ability to abandon or shift direction. However, project teams may find it difficult to do so due to sunk costs or emotional investment, known as the "sunk cost fallacy" or escalation of commitment.

Which of These Is a Potential Disadvantage of a Real