Investment timing and capacity choice under uncertainty
type: Item
instance of: scholarly article
title: Investment timing and capacity choice under uncertainty
zbMATH Open document ID: 1406.91480
DOI: 10.1155/2014/801862
author: Xiumei Lv
author: Xiaoling Tang
author: Shiqin Xu
published in: Abstract and Applied Analysis
publication date: 2019-02-14T00:00:00Z
review text: Summary: This paper examines strategic investment between two firms that compete not only for investment timing but also for capacity under stochastic market demand. The value functions of real option for the follower, the dominant leader, and the preemptive leader are derived and their investment decisions are investigated. It finds that both firms will delay investment and the delayed margin of the follower will surpass that of the leader under greater uncertainty. Furthermore, both firms will provide more outputs in the face of increasing uncertainty and the growth rate of the follower's capacity will exceed that of the leader's. In addition, this paper finds that the follower will end up with a larger capacity than the leader.
Mathematics Subject Classification ID: 91G50
zbMATH DE Number: 7023101
zbMATH Keywords: investment timing
zbMATH Keywords: real option
zbMATH Keywords: stochastic market demand
zbMATH Keywords: capacity choice
Wikidata QID: Q59041609
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2014/801862
OpenAlex ID: W2159054544
cites work: Real options in strategic investment games between two asymmetric firms
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description: scientific article; zbMATH DE number 7023101