An efficient curve in stochastic capacity expansion

Hee Won Kang and Sung Joo Park

Omega, 1983, vol. 11, issue 2, 147-153

Abstract: An optimum expansion of a single capacity is considered when the installation cost is very large and future demand is given by an evolving process of Wiener. Risk of expansion is evaluated and included in the decision criteria which links the capacity expansion problem with financial investment theory, Numerical results show the existence of an optimum expansion capacity and an efficient curve which represent the optimum choices with respect to the possible combinations of expansion cost and risk.

Date: 1983
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