Investment and capacity choice under uncertain demand

Investment and capacity choice under uncertain demand

Papers published in this report series are preliminary versions of journal articles and not for quotations. Abstract This paper extends the real options literature by discussing an investment problem, where a firm has to determine optimal investment timing and optimal capacity choice at the same time under conditions of irreversible investment expenditures and uncertainty in future demand. Afte...

Strategic Technology Choice and Capacity Investment Under Demand Uncertainty

This paper studies the impact of competition on a firm’s choice of technology (product-flexible or product-dedicated) and capacity investment decisions. Specifically, we model two firms competing with each other in two markets characterized by price-dependent and uncertain demand. The firms make three decisions in the following sequence: choice of technology (technology game), capacity investme...

The Effect Of Salvage Market On Strategic Technology Choice And Capacity Investment Decision Of Firm Under Demand Uncertainty

Investment, Capacity Choice and Outsourcing under Uncertainty

In this paper, we formulate a firm’s investment in a production facility with maximum capacity and outsourcing strategy. Existing literature of capacity choice results in an explosive capacity and long delay in investment. Actually, there are slight possibility that a firm installs a facility with an explosive capacity, instead, a firm can outsource production when the demand exceeds its capaci...

Capacity Investment Under Postponement Strategies, Market Competition, and Demand Uncertainty

We provide a comprehensive analysis of capacity investment decisions in duopoly models with demand uncertainty. Firms make capacity investment, production, delivery and pricing decisions. Capacity investment decisions are always made ex-ante demand whereas price decisions always ex-post. The interplay between the timing of demand information and the decision of production and delivery endows fi...