Batch process and transfer decisions in foreign market: a real options model

Chin‐Tsai Lin and Cheng‐Ru Wu

Applied Stochastic Models in Business and Industry, 2003, vol. 19, issue 2, 121-131

Abstract: This investigation extends the constant elasticity of substitution (CES) batch process production model of Lin et al. (J. Management syst. 2002; 9: 173) for an uncertain exchange rate by considering an export‐oriented manufacturer who can decide to switch freely between domestic and foreign locations. The export‐oriented manufacturer is risk averse and has rational expectations. As the entry cost declines, the export‐oriented manufacturer's entry trigger for the CES production function increases for transferring from a domestic and to a foreign location. Additionally, the manufacturer's exit trigger for CES production function increases for transferring from a foreign and to a domestic location. Moreover, the exit cost resembles the entry cost. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:wly:apsmbi:v:19:y:2003:i:2:p:121-131

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