scholarly journals Financing Capacity Investment Under Demand Uncertainty

2014 ◽  
Author(s):  
Francis deVericourt ◽  
Denis Gromb
Keyword(s):  
Demand Uncertainty ◽  
Capacity Investment

scholarly journals EFFECT OF SALVAGE MARKET ON STRATEGIC TECHNOLOGY CHOICE AND CAPACITY INVESTMENT DECISION OF FIRM UNDER DEMAND UNCERTAINTY

2016 ◽  
Vol 17 (1) ◽  
pp. 140-155 ◽  
Author(s):  
Mohammad Ali KASHEFI
Keyword(s):  
Demand Uncertainty ◽  
Numerical Study ◽  
Investment Decision ◽  
Secondary Market ◽  
Theoretic Model ◽  
Technology Choice ◽  
Capacity Investment ◽  
Flexible Technology ◽  
Game Theoretic ◽  
Unique Nash Equilibrium

This paper examines the effect of salvage market on technology choice and capacity investment decision of two firms that compete on quantity under demand uncertainty. A game theoretic model applies such that firms choose their production technology between two alternatives: flexible versus inflexible production process. Then they decide on the amount of capacity investment: flexible firm makes decision about general and specific components and inflexible firm just about unified component. One stage forward both enter the primary market in which demand is uncertain and play a la Cournot and finally, flexible firm will be able to sell its unsold general components in the secondary market with a deterministic price. Numerical study was employed to observe equilibrium behavior of firms. Findings demonstrate that with symmetric parameterization there is a unique Nash equilibrium in which both firms choose inflexible technology while applying asymmetric parameters has the potential to form two types of equilibrium when both firms choose inflexible technology or only one firm chooses flexible technology. Moreover, it is shown that there is a cost threshold that could shift the equilibria.

Volume flexibility and capacity investment under demand uncertainty

2016 ◽  
Vol 178 ◽  
pp. 95-108 ◽  
Author(s):  
Verena Hagspiel ◽  
Kuno J.M. Huisman ◽  
Peter M. Kort
Keyword(s):  
Demand Uncertainty ◽  
Capacity Investment ◽  
Volume Flexibility

Capacity investment in electricity markets under supply and demand uncertainty

Energy ◽  
2018 ◽  
Vol 150 ◽  
pp. 1006-1017 ◽  
Author(s):  
Joana Pinho ◽  
Joana Resende ◽  
Isabel Soares
Keyword(s):  
Electricity Markets ◽  
Demand Uncertainty ◽  
Supply And Demand ◽  
Capacity Investment

Capacity decision under preset service level and process flexibility

2018 ◽  
Vol 13 (3) ◽  
pp. 755-772
Author(s):  
Dipankar Bose ◽  
A.K. Chatterjee ◽  
Samir Barman
Keyword(s):  
Demand Uncertainty ◽  
Optimization Procedure ◽  
Service Level ◽  
Capacity Investment ◽  
Product Price ◽  
Process Flexibility ◽  
Content Type ◽  
Investment Cost ◽  
Flexible Plant ◽  
Demand Correlation

PurposeProcess flexibility (PF) is seen as a hedging instrument against demand uncertainty. This paper aims to examine capacity decisions for both flexible and dedicated processes under production policies such as make-to-order and make-to-stock. The study identifies some relative benefits, in terms of expected profit, of the process flexible plant over the dedicated ones. Furthermore, the advantage appears to be contingent upon the decision on the preset service level.Design/methodology/approachUsing the sample-based optimization procedure, a detailed computational analysis is undertaken to identify the conditions under which a flexible plant is preferred over a dedicated plant. A combination of genetic algorithm and sample-based optimization procedure is used to capture the effects of preset service level. The factors controlled in this paper include the demand variance, demand correlation, capacity investment cost and the product price.FindingsAccording to this study, in a dedicated process changing to a flexible process is not justified for the same level of demand correlation even with high demand variance. In fact, a strict control on the preset service level prefers the dedicated strategy. The advantage of a flexible plant increases as the demand correlation decreases, product price decreases, price asymmetry increases or capacity investment cost increases. With a preset service level constraint, a flexible process should be preferred to a dedicated one only when the capacity investment cost is high or the products have low contribution margins.Originality/valueThe PF index is introduced in this paper to measure the benefit of a flexible plant over a group of dedicated plants. The benefits were found to be contingent upon the decision on the required service level.

scholarly journals Capacity Investment under Demand Uncertainty: The Role of Imports in the U.S. Cement Industry

2015 ◽  
Vol 25 (2) ◽  
pp. 455-486 ◽  
Author(s):  
Guy Meunier ◽  
Jean-Pierre Ponssard ◽  
Catherine Thomas
Keyword(s):  
Demand Uncertainty ◽  
Cement Industry ◽  
Capacity Investment ◽  
The U.S
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