Investment timing and capacity decisions with time-to-build in a duopoly market

Jeon, Haejun

doi:10.1016/j.jedc.2020.104028

Cited by 17 publications

(4 citation statements)

References 32 publications

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“…To analyze the new product investment outcome from a welfare perspective, we analyze the effect of product introduction on social welfare. Following previous researchers on social welfare, for example, Huisman and Kort (2015), Jeon (2021), and Kim et al (2020), we show the instantaneous social welfare function of monopoly and duopoly period as follows.

{SW}_{1} goodbreak= \int_{0}^{1} ((), v goodbreak- italiccx goodbreak- ((), v goodbreak- c)) italicdx goodbreak+ π_{i}^{M},

\begin{matrix} lefttrue \\ {italicSW}_{2} = π_{i}^{e} + π_{j}^{f} + (1 - α) (\int_{0}^{\frac{p_{j} + c - p_{i}}{2 c}} u_{i}^{n} dx + \int_{\frac{p_{j} + c - p_{i}}{2 c}}^{1} u_{j}^{n} dx) \\ + α (\int_{0}^{\frac{p_{j} + c - θ g_{j} - p_{i} - ε}{2 c}} u_{i}^{g} dx + \int_{\frac{p_{j} + c - θ g_{j} - p_{i} - ε}{2 c}}^{1} u_{j}^{g} dx), \end{matrix}

where

{SW}_{1}

and

{SW}_{2}

are the instantaneous social welfare of the monopoly and duopoly period, respectively, and

u_{a}^{g}

and

u_{a}^{n}

are green consumer and neural consumer's utility from purchasing product

a, a \in

…”

Section: Discussionmentioning

confidence: 97%

Section: Social Welfarementioning

confidence: 99%

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Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Li,

Tan

2024

Manage Decis Econ

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Leveraging real options theory, we have constructed a utility‐based model to examine the influence of uncertainty, risk aversion, and competition on the optimal entry timing for green manufacturers and traditional manufacturers, as well as the degree of greenness for follower products. Our analysis reveals that increased uncertainty and risk aversion enhance the value of investment opportunities for manufacturers, thereby raising their investment thresholds. Even though competition reduces the value of market entry for the leader compared to monopoly, its investment thresholds are unaffected by competition. More interestingly, consumer green preferences exhibit a non‐monotonic impact on green enterprise's entry timing.

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{SW}_{1} goodbreak= \int_{0}^{1} ((), v goodbreak- italiccx goodbreak- ((), v goodbreak- c)) italicdx goodbreak+ π_{i}^{M},

\begin{matrix} lefttrue \\ {italicSW}_{2} = π_{i}^{e} + π_{j}^{f} + (1 - α) (\int_{0}^{\frac{p_{j} + c - p_{i}}{2 c}} u_{i}^{n} dx + \int_{\frac{p_{j} + c - p_{i}}{2 c}}^{1} u_{j}^{n} dx) \\ + α (\int_{0}^{\frac{p_{j} + c - θ g_{j} - p_{i} - ε}{2 c}} u_{i}^{g} dx + \int_{\frac{p_{j} + c - θ g_{j} - p_{i} - ε}{2 c}}^{1} u_{j}^{g} dx), \end{matrix}

where

{SW}_{1}

and

{SW}_{2}

are the instantaneous social welfare of the monopoly and duopoly period, respectively, and

u_{a}^{g}

and

u_{a}^{n}

are green consumer and neural consumer's utility from purchasing product

a, a \in

…”

Section: Discussionmentioning

confidence: 97%

Section: Social Welfarementioning

confidence: 99%

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Li,

Tan

2024

Manage Decis Econ

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show abstract

“…The downside flexibility is similar to the flexible capacity of [10] but the upside flexibility allows the firm to produce beyond the installed capacity. [12,13] also consider optimal investment timing and capacity decisions using the real options framework. In these papers dealing with flexible capacity, the main driving force is uncertainty in demand.…”

Section: Literature Reviewmentioning

confidence: 99%

“…β 1 > 1 and β 2 < 0 follows from the properties of the quadratic equation in (12) as explained below. To satisfy the boundary condition in equation ( 7), the general solution to (6) which has the form…”

Section: Axiommentioning

confidence: 99%

Impact of Plant Utilization on Irreversible Investment Under Uncertainty with Application to Refinery Investment

Omosigho

Enoyoze

Ekhosuehi³

2021

Cro. Oper. Res. Rev.

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Why are some regions preferred when investors consider irreversible investment? This study offers an explanation to this question and suggests improvements that will assist disadvantaged regions improve on their bid for funds. The paper considers irreversible investment under uncertainty when installed capacity utilization is incorporated. We develop a normative model for irreversible investment problem under uncertainty using real options approach. Capacity utilization was not a major consideration by previous authors who assumed that installed capacity would be fully utilized. Variations in capacity utilization may be attributed to disruption in input supply or infrastructural bottlenecks that limit firms to get their products to customers. This study modifies the geometric Brownian motion for the value of a project to account for capacity utilization in the derivation of irreversible investment decision rule. The proposed model provides a theoretical explanation of how utilization affects irreversible investment decisions. Data on petroleum refinery margins is used to illustrate application of the proposed model to refinery investment. The study reveals that capacity utilization has an inverse effect on the investment trigger, and so, links irreversible investment decisions to plant utilization. We recommend optimal utilization of installed plant capacity for regions seeking funds for irreversible investment.

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Investment strategies of duopoly firms with asymmetric time-to-build under a jump-diffusion model

Liu,

Sun

2023

Math Meth Oper Res

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Investment timing and capacity decisions with time-to-build in a duopoly market

Cited by 17 publications

References 32 publications

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Timing and green decisions for competitive manufacturers under demand uncertainty and risk aversion

Impact of Plant Utilization on Irreversible Investment Under Uncertainty with Application to Refinery Investment

Investment strategies of duopoly firms with asymmetric time-to-build under a jump-diffusion model

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