Investment, Capacity Choice and Outsourcing Options under Uncertainty

• Goto Makoto

  Graduate School of Economics and Business Administration, Hokkaido University

• Takashima Ryuta

  Department of Industrial Administration, Tokyo University of Science

Abstract

In this paper, we formulate the investment of a firm in a production facility with maximum capacity and outsourcing strategy. Previous research on capacity selection has resulted in explosive capacity and long delay in investment. The possibility that a firm will install a facility with an explosive capacity is slight, and firms can generally outsource production when the demand exceeds the capacity of a facility. The outsourcing strategy is expected to inhibit capacity, accelerate investment, and increase value. In this paper, we simultaneously investigate the optimal investment timing, the size of a facility, and the outsourcing strategy.

Journal

• International Journal of Real Options and Strategy

  International Journal of Real Options and Strategy 1 (0), 17-27, 2013

  The Japan Association of Real Options and Strategy

Keywords

• Capacity choice
• Outsourcing
• Real options

Details

• CRID: 1390282680479496064
• NII Article ID: 130005001741
• DOI: 10.12949/ijros.1.17
• ISSN: 21864667
• Web Site: https://www.jstage.jst.go.jp/article/ijros/1/0/1_17/_pdf
• Text Lang: en
• Data Source:
  • JaLC
  • Crossref
  • CiNii Articles
  • KAKEN
• Abstract License Flag: Disallowed