The value of capacity sizing under risk aversion and operational flexibility

• Main Authors: CHRONOPOULOS, Michail, DE REYCK, Bert, SIDDIQUI, Afzal
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2013
• Subjects: Capacity sizing; energy sector; real options; risk aversion; Operations and Supply Chain Management; Risk Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6757; https://doi.org/10.1109/TEM.2012.2211363
• Institution: Singapore Management University

Risk aversion typically erodes the value of an investment opportunity, often increasing the incentive to delay investment. Although this may be true when the decision maker has discretion only over the timing of investment, any additional discretion over the capacity of a project may lead to differe...