EconPapers    
Economics at your fingertips  
 

Mix, Time and Volume Flexibility: Valuation and Corporate Diversification

J. Chod, N. Rudi and J.A. Van Mieghem

Review of Business and Economic Literature, 2012, vol. 57, issue 3, 262-283

Abstract: This article examines the joint impact of three types of operational flexibility in a theoretical model of a two-product firm that makes capacity, production and pricing decisions at three points in time with an underlying continuous-time information evolution. Mix flexibility is measured by the cost of switching production between the two products. Volume flexibility is measured by the fraction of production cost that is variable at the time when the production decision is made. Finally, time flexibility is measured by the relative timing of the production decision. We show that mix and volume flexibilities are substitutes in creating firm value but both are complementary to time flexibility. We discuss the implications of these results for the optimal investment in different aspects of flexibility. We also relate these results to corporate strategy and show how different types of flexibility impact the benefits of corporate diversification.

Date: 2012
References: Add references at CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sen:rebelj:v:57:i:3:y:2012:p:262-283

Access Statistics for this article

Review of Business and Economic Literature is currently edited by Hans Kluwer

More articles in Review of Business and Economic Literature from Intersentia
Bibliographic data for series maintained by Petra Van den Bempt ().

 
Page updated 2018-10-06
Handle: RePEc:sen:rebelj:v:57:i:3:y:2012:p:262-283