Stochastic Capacity Investment and Flexible vs. Dedicated Technology Choice in Imperfect Capital Markets

• Main Authors: BOYABATLI, Onur, TOKTAY, L. Bertil
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: capacity; flexibility; financing; newsvendor; limited liability; market imperfection; Finance and Financial Management; Operations and Supply Chain Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3789; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4789/viewcontent/StochasticCapacityInvestmentFlexvDedicated_2011_pv.pdf; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4789/filename/0/type/additional/viewcontent/boyabatli_toktay_appendix.pdf
• Institution: Singapore Management University

This paper analyzes the impact of endogenous credit terms under capital market imperfections in a capacity investment setting. We model a monopolist firm that decides on its technology choice (flexible versus dedicated) and capacity level under demand uncertainty. Differing from the majority of the...