Optimizing Location Among Three Countries Under Exchange Rate Uncertainty: Applying Real Options

Optimizing Location Among Three Countries Under Exchange Rate Uncertainty: Applying Real Options This investigation extends the Batch Process Model [Lin et al. (2002). Journal of management and system 9: 173–196] from two productive locations between two countries to establish a decision valuation model for selecting the optimal location of three productive locations among three countries, respectively. A general form with the first order of degree homothetic production functions is also considered by the rule of decision-making in the proposed model. The firm is risk neutral and this study adopts the real options approach for valuing the behavior of the transferable location among three countries. Furthermore, using Dynamic programming and Lagrange Multiplies for a continuous-Time Model Optimization Problem to get a closed form solution of the threshold value, sensitivity analysis, and some characteristic strategies of the operating method for batch process model among three countries are sought, providing for another way of thinking. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Quality & Quantity Springer Journals

Optimizing Location Among Three Countries Under Exchange Rate Uncertainty: Applying Real Options

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Publisher
Springer Journals
Copyright
Copyright © 2007 by Springer
Subject
Social Sciences; Methodology of the Social Sciences; Social Sciences, general
ISSN
0033-5177
eISSN
1573-7845
D.O.I.
10.1007/s11135-005-1461-2
Publisher site
See Article on Publisher Site

Abstract

This investigation extends the Batch Process Model [Lin et al. (2002). Journal of management and system 9: 173–196] from two productive locations between two countries to establish a decision valuation model for selecting the optimal location of three productive locations among three countries, respectively. A general form with the first order of degree homothetic production functions is also considered by the rule of decision-making in the proposed model. The firm is risk neutral and this study adopts the real options approach for valuing the behavior of the transferable location among three countries. Furthermore, using Dynamic programming and Lagrange Multiplies for a continuous-Time Model Optimization Problem to get a closed form solution of the threshold value, sensitivity analysis, and some characteristic strategies of the operating method for batch process model among three countries are sought, providing for another way of thinking.

Journal

Quality & QuantitySpringer Journals

Published: Jan 31, 2005

References

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