We study investment options in a dynamic agency model. Moral hazard creates an option to wait and agency conflicts … affect the timing of investment. The model sheds light, theoretically and quantitatively, on the evolution of firms' dynamics …

This paper provides a model of investment timing by managers in a decentralized firm in the presence of agency … conflicts and information asymmetries. When investment decisions are delegated to managers, contracts must be designed to …'s option. The implied investment behavior differs significantly from that of the first-best no-agency solution. In particular …