search query: @indexterm production management / total: 708
reference: 362 / 708
Author: | Chung, K. H. |
Title: | Output decision under demand uncertainty with stochastic production function: a contingent claims approach. |
Journal: | Management Science
1990 : NOV, VOL. 36:11, p. 1311-1328 |
Index terms: | PRODUCTION FUNCTION PRODUCTION MANAGEMENT DECISION MAKING |
Language: | eng |
Abstract: | A classic problem faced by firms of determining the level of output before demand is known is studied. A contingent claims analysis is presented for output decisions for the firm facing uncertainties. It was found that optimal output level increases with the higher interest rate when uncertainty is faced; the effect of demand volatility and production lead time on the optimal output level can be either positive or negative; optimal project value decreases with the higher demand volatility, with the longer production lead time and with the higher interest rate when the firm is subject to demand uncertainty, and increaes with higher interest rate when both demand and technological uncertainities should be faced. |
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