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The Impact Of Budget Constraints On Flexible Vs. Dedicated Technology Choice, Onur Boyabatli, Tiecheng Leng, L. Beril Toktay
The Impact Of Budget Constraints On Flexible Vs. Dedicated Technology Choice, Onur Boyabatli, Tiecheng Leng, L. Beril Toktay
Research Collection Lee Kong Chian School Of Business
This paper studies the flexible versus dedicated technology choice and capacity investment decisions of a multiproduct firm under demand uncertainty in the presence of budget constraints. The firm operates under a capital budget for financing the capacity investment, and an operating budget, which is uncertain in the capacity investment stage, for financing the production. We investigate how the tightening of the capital budget and a lower financial flexibility in the production stage (the likelihood of having a sufficient operating budget) shape the optimal technology choice. We find that the dominant regime is one where dedicated technology should be adopted for …
Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets, Onur Boyabatli, L. Bertil Toktay
Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets, Onur Boyabatli, L. Bertil Toktay
Research Collection Lee Kong Chian School Of Business
This paper analyzes the impact of endogenous credit terms under capital market imperfections in a capacity investment setting. We model a monopolist firm that decides on its technology choice (flexible versus dedicated) and capacity level under demand uncertainty. Differing from the majority of the stochastic capacity investment literature, we assume that the firm is budget constrained and can relax its budget constraint by borrowing from a creditor. The creditor offers technology-specific loan contracts to the firm, after which the firm makes its technology choice and subsequent decisions. Capital market imperfections impose financing frictions on the firm. Our analysis contributes to …
Technical Appendix To "Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets", Onur Boyabatli
Technical Appendix To "Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets", Onur Boyabatli
Research Collection Lee Kong Chian School Of Business
Technical appendix with proofs for the technical statements in the article: Stochastic capacity investment and flexible vs. dedicated technology choice in imperfect capital markets. (2011). Management Science, 57 (12), 2163 - 2179. https://doi.org/10.1287/mnsc.1110.1395