Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
478766 | European Journal of Operational Research | 2010 | 5 Pages |
Abstract
This note presents a contingent-claims approach to strategic capacity planning. We develop models for capacity choice and expansion decisions in a single firm environment where investment is irreversible and demand is uncertain. These models illustrate specifically the relevance of path-dependent options analysis to planning capacity investments when the firm adopts demand tracking or average capacity strategies. It is argued that Asian/average type real options can explain hysteresis phenomena in addition to providing superior control of assets in place.
Keywords
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Tarik Driouchi, David Bennett, Gary Simpson,