A path-dependent contingent-claims approach to capacity investments
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.
Year of publication: |
2010
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Authors: | Driouchi, Tarik ; Bennett, David ; Simpson, Gary |
Published in: |
European Journal of Operational Research. - Elsevier, ISSN 0377-2217. - Vol. 201.2010, 1, p. 319-323
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Publisher: |
Elsevier |
Keywords: | Capacity decisions Real options Path-dependent contingent-claims |
Saved in:
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