A key premise in the discussion is that managers are sufficiently sophisticated so as to use real-option techniques. However, in practice, the application of real-option techniques is spotty. Many managers find real-option techniques to be framed opaquely, and their resulting discomfort leads them to rely on simpler heuristics.

Mild excessive optimism and overconfidence can be desirable traits for managers to possess when there are conflicts of interest between bondholders and equity holders. Ultimately, equity holders bear the cost of conflicts that lead managers to favor the interests of equity holders over debt holders. However, excessive optimism and overconfidence tend to introduce countervailing forces that mitigate the behavior that concerns bondholders.