The relationship between commitment and strategic options may be best described as:
A)Commitments increase the value of real options
B)By committing to a set of options,a firm can reconcile two sources of value: value from deterring competitors and value from real options
C)Making commitments inevitably involve giving up options
D)The two reside in different realms of analysis: commitments can be analyzed using game theory;real options can be analyzed using financial theory

Question

Quizplus · Accepted Answer

Making commitments typically involves giving up options. When a firm commits to a certain course of action, it limits its flexibility to pursue alternative strategies, which reduces the number of options available to the firm. Conversely, preserving optionality requires avoiding commitment to a particular strategy or path. Therefore, committing to one strategic option typically reduces the value of other options, while preserving optionality requires avoiding commitments.

The Relationship Between Commitment and Strategic Options May Be Best