Volume flexibility and capacity investment: a real options approach View Full Text


Ontology type: schema:ScholarlyArticle      Open Access: True


Article Info

DATE

2017-12

AUTHORS

Xingang Wen, Peter M. Kort, Dolf Talman

ABSTRACT

This paper considers the investment decision of a firm where it has to decide about the timing and capacity. We obtain that in a fast-growing market, right after investment the firm produces below capacity, where the utilization rate (the proportion of capacity that is used for production right after the investment) increases with market uncertainty for a very big market trend, and shows no monotonicity for a moderately large market trend. On the other hand, we get that, for a slowly growing or shrinking market, the firm produces up to capacity right after investment. In the intermediate case, the firm produces up to capacity right after investment when uncertainty is low and below capacity when uncertainty is high, whereas the utilization rate decreases with the market uncertainty. More... »

PAGES

1633-1646

References to SciGraph publications

  • 1990-07. Flexibility in manufacturing: A survey in INTERNATIONAL JOURNAL OF FLEXIBLE MANUFACTURING SYSTEMS
  • Identifiers

    URI

    http://scigraph.springernature.com/pub.10.1057/s41274-017-0196-5

    DOI

    http://dx.doi.org/10.1057/s41274-017-0196-5

    DIMENSIONS

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