the value of fast fashion quick response enhanced design and strategic consumer behavior a fast fashion system combines quick response production capabilities with enhanced product design capabilities to both design hot products that capture the latest consumer trends and exploit minimal production lead times to match supply with uncertain demand we develop a model of such a system and compare its performance to three alternative systems quick response only systems enhanced design only systems and traditional systems which lack both enhanced design and quick response capabilities in particular we focus on the impact of each of the four systems on strategic or forward looking consumer purchasing behavior i e the intentional delay in purchasing an item at the full price to obtain it during an end of season clearance we find that enhanced design helps to mitigate strategic behavior by offering consumers a product they value more making them less willing to risk waiting for a clearance sale and possibly experiencing a stockout quick response mitigates strategic behavior through a different mechanism by better matching supply to demand it reduces the chance of a clearance sale most importantly we find that although it is possible for quick response and enhanced design to be either complements or substitutes the complementarity effect tends to dominate hence when both quick response and enhanced design are combined in a fast fashion system the firm typically enjoys a greater incremental increase in profit than the sum of the increases resulting from employing either system in isolation furthermore complementarity is strongest when customers are very strategic we conclude that fast fashion systems can be of significant value particularly when consumers exhibit strategic behavior this paper was accepted by yossi aviv operations management

dynamic game results of the acquisition of new technology open and closed loop nash strategies are derived and analyzed for a differential game in which two competing firms choose prices and productive capacity where new technology reduces a firm s unit operating cost using an open loop strategy a firm makes an irreversible commitment to a future course of action for example a contract with a labor union may force a firm to commit to maintaining its entire workforce regardless of its competitor s future realized behavior in contrast using a closed loop strategy a firm s decisions evolve over time continuously responding to the competitor s behavior the dynamic nash strategies obtained for the closed loop model exhibit a more restricted acquisition of new technology and a greater reduction of existing capacity relative to the open loop solutions in addition the dynamic nash price to be charged for output is higher in the closed as opposed to open loop competitive environment numerical solutions are presented to demonstrate that if both firms apply the closed loop approach each will earn higher profits than if one or both firms choose an open loop strategy

multi resource investment strategies operational hedging under demand uncertainty abstract consider a firm that markets multiple products each manufactured using several resources representing various types of capital and labor and a linear production technology the firm faces uncertain product demand and has the option to dynamically readjust its resource investment levels thereby changing the capacities of its linear manufacturing process the cost to adjust a resource level either up or down is assumed to be linear the model developed here explicitly incorporates both capacity investment decisions and production decisions and is general enough to include reversible and irreversible investment the product demand vectors for successive periods are assumed to be independent and identically distributed the optimal investment strategy is determined with a multi dimensional newsvendor model using demand distributions a technology matrix prices product contribution margins and marginal investment costs our analysis highlights an important conceptual distinction between deterministic and stochastic environments the optimal investment strategy in our stochastic model typically involves some degree of capacity imbalance which can never be optimal when demand is known

volume flexibility and capacity investment under demand uncertainty the paper considers optimal capacity investment decisions under uncertainty taking a real options approach concerning the production decision we study a flexible and an inflexible scenario the flexible firm can costlessly adjust production over time with the capacity level as the upper bound while the inflexible firm fixes production at capacity level from the moment of investment onwards we find that the flexible firm invests in higher capacity than the inflexible firm where the capacity difference increases with uncertainty for the flexible firm the initial capacity utilization rate can be quite low especially when investment costs are concave and the economic environment is uncertain as to the timing of the investment there are two contrary effects first the flexible firm has an incentive to invest earlier because flexibility raises the project value second the flexible firm has an incentive to invest later because costs are larger due to the higher capacity level the latter effect dominates in highly uncertain economic environments our model being dynamic enables us to derive the at first sight counterintuitive result that an increase in capacity holding cost raises the capacity level the firm invests in

capacity investment under postponement strategies market competition and demand uncertainty we consider duopoly models where firms make decisions on capacity production and price under demand uncertainty capacity and price decisions are made respectively ex ante and ex post demand realizations the interplay between the timings of demand realization and production decision endows firms with different capabilities flexible firms can postpone production decisions until the actual demand curve is observed but inflexible firms cannot under general demand structures and cost functions we characterize the equilibrium for a symmetric duopoly and establish the strategic equivalence of price and quantity competitions when firms are flexible we investigate the stochastic order properties of capacity and profit and show that they both increase for a flexible firm when the market is more volatile we find that flexibility allows a firm to increase investment in capacity and earn a higher profit while benefiting customers by keeping the price in a narrower range strategic equivalence implies that

unequal treatment of identical agents in cournot equilibrium oligopoly models where prior actions by firms affect subsequent marginal costs have been useful in illuminating policy debates in areas such as antitrust regulation environmental protection and international competition we discuss properties of such models when a cournot equilibrium occurs at the second stage aggregate production costs strictly decline with no change in gross revenue or gross consumer surplus if the prior actions strictly increase the variance of marginal costs without changing the marginal cost sum therefore unless the cost of inducing second stage asymmetry more than offsets this reduction in production costs the private and social optima are asymmetric

dynamic capacity planning using strategic slack valuation in this paper we analyze a particular aspect of capacity planning that is concerned with the active trading of production facilities for a homogenous product market we provide a theoretical rationale for the valuation and trading of these assets based on a metric of strategic slack we show that trading production assets with non additive portfolio profitability involves complex coordination with multiple equilibria and that these equilibria depend on the foresight in the planning horizon using the concept of strategic slack we have analyzed the dynamics of market structure the impact of asset trading on the level of production of the industry and to derive boundaries on the value of the traded assets moreover through computational learning the formulation is applied to a large oligopolistic electricity market showing that plant trading tends to lead to increased market concentration high prices lower production and a decrease in consumer surplus

stochastic capacity investment and flexible vs dedicated technology choice in imperfect capital markets 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 the capacity investment literature by extending the theory of stochastic capacity investment and flexible versus dedicated technology choice to understand the impact of capital market imperfections and by analyzing the impact of demand uncertainty variability and correlation on the operational decisions and the performance of the firm under different capital market conditions we demonstrate that the endogenous nature of credit terms in imperfect capital markets may modify or reverse conclusions concerning capacity investment and technology choice obtained under the perfect market assumption and we explain why the theory developed in this paper suggests some rules of thumb for the strategic management of the capacity and technology choice in imperfect capital markets this paper was accepted by john birge focused issue editor

optimal investment strategies for flexible resources considering pricing and correlated demands we study the optimal resource investment decision faced by a two product price setting firm that operates in a monopolistic setting and employs a postponed pricing scheme the firm has the option to invest in dedicated resources as well as a more expensive flexible resource that can satisfy both products while the resource investment decision is made under demand uncertainty pricing and resource allocation decisions are postponed to the time when demand curves are realized our analysis provides the structure of the firm s optimal resource investment strategy as a function of demand parameters and investment costs and shows that the flexible resource investment decision follows athreshold policy we also show that it can be optimal for the firm to invest in the flexible resource even when demand patterns are perfectly positively correlated the reason for flexible capacity investment in this case is financial rather than risk pooling on the other hand we show that it can be optimal for the firm not to invest in the flexible resource even when demand patterns are perfectly negatively correlated the flexible resource investment decision in this case depends on the profitability of the two products based on our analysis we provide principles on the firm s optimal resource investment decision

resource flexibility with responsive pricing this article studies two types of flexibility used by firms to better respond to uncertain market conditions resource flexibility and responsive pricing we consider a situation in which a single flexible resource can be used to satisfy two distinct demand classes while the resource capacity must be decided based on uncertain demand functions the resource allocation as well as the pricing decision are made based on the realized demand functions we characterize the effects of two key drivers of flexibility demand variability and demand correlation assuming normally distributed demand curve intercepts demand variability creates opportunity costs and with fixed prices decreases the firm s profit we show that with the additional flexibility gained from responsive pricing the firm can maximize the benefits of favorable demand conditions and mitigate the effects of poor demand conditions ultimately profiting from variability positive demand correlation on the other hand remains undesirable under responsive pricing the optimal capacity of the flexible resource is always increasing in both demand variability and demand correlation this contrasts with the scenarios based on fixed prices highlighting the crucial difference that responsive pricing makes in the management of flexible resources we further quantify the value of flexibility for the firm and its customers by considering as a benchmark a firm relying on two dedicated resources the value of flexibility is most significant if the demand levels are highly variable and negatively correlated in such cases the firm benefits from demand variability due to responsive pricing while facing limited demand risk due to resource flexibility finally we endogenize the input price of the flexible resource by considering the pricing decision of the resource supplier

the wage mobility of minimum wage workers using longitudinal data from the survey of income and program participation the authors examine the earnings mobility of workers employed at the minimum wage results indicate that over 60 of wor

strategic aspects of flexible production technologies theory and evidence abstract in this paper we examine the innovative manufacturing technologies known as flexible manufacturing systems fms we begin with a description of these systems and the industries in which they are used we then review several theoretical models which analyze the decision process to invest in fms these models illustrate the importance of such market factors as product differentiation differences in cost and market size degree of competition and market dynamics in the second part of the paper we present some new empirical evidence using a database of almost 3 000 business units this empirical evidence is shown to be consistent with the theory

r d competition versus r d cooperation in oligopolistic markets with evolving structure this paper considers investment behavior of duopolistic firms subject to technological progress it is assumed that initially both firms offer a homogeneous product but after a stochastic waiting time they are able to implement a product innovation production capacities of both firms are product specific it is shown that firms anticipate a future product innovation by under investing if the new product is a substitute to the established product and higher profits and over investing in case of complements and lower profits compared to the corresponding standard capital accumulation game this anticipation effect is stronger in the case of r d cooperation furthermore since due to r d cooperation firms introduce the new product at the same time this leads to intensified competition and lower firm profits right after the new product has been introduced in addition we show that under r d competition the firm that innovates first overshoots in new product capacity buildup in order to exploit its temporary monopoly position taking into account all these effects the result is that if the new product is neither a close substitute nor a strong complement of the established product positive synergy effects in r d cooperation are necessary to make it more profitable for firms than r d competition

the strategic perils of delayed differentiation the value of delayed differentiation also known as postponement for a monopolist has been extensively studied in the operations literature we analyze the case of imperfectly competitive markets with demand uncertainty wherein the choice of supply chain configuration i e early or delayed differentiation is endogenous to the competing firms we characterize firms choices in equilibrium and analyze the effects of these choices on quantities sold profits consumer surplus and welfare we demonstrate that purely strategic considerations not previously identified in the literature play a pivotal role in determining the value of delayed differentiation in the face of either entry threats or competition these strategic effects can significantly diminish the value of delayed differentiation in fact under plausible conditions these effects dominate the traditional risk pooling benefits associated with delayed differentiation in which case early differentiation is the dominant strategy for firms even under cost parity with delayed differentiation we extend the main model to study the effects of alternate market structures asymmetric markets and inventory holdback our results in particular that for a broad range of parameter values early differentiation is a dominant strategy even under cost parity with delayed differentiation are robust to these relaxations

demand uncertainty and price maintenance markdowns as destructive competition this paper offers a new theory of destructive competition the authors compare minimum resale price maintenance to retail market clearing in a model with a monopolistic manufacturer selling to competitive retailers in both the resale price maintenance and flexible price games retailers must order inventories before the realization of demand uncertainty the authors find that manufacturer profits and equilibrium inventories are higher under resale price maintenance than under market clearing surprisingly consumer surplus can also be higher in which case unfettered retail competition can legitimately be called destructive copyright 1997 by american economic association

turning water into wine exploring the role of dynamic capabilities in early stage capitalization processes technology based ventures face considerable challenges when attempting to raise early stage capital during the early stages of development to create an operational business they need access to financial capital but external investors prefer to see an operational business before investing capital this study extends arguments grounded in dynamic managerial capabilities theory to examine the extent to which various trade offs among the quality of a venture s management team radicalness of the firm s technological resources and demand uncertainty in focal markets impact the ability of ventures to resolve these capitalization challenges we find that higher levels of demand uncertainty and more radical innovations do not appear to enhance the impact of strong management teams on the raising of early stage capital however lower levels of uncertainty do appear to strengthen the effects of strong management teams implications of these findings for dynamic capabilities theory and early stage capitalization processes are discussed

competition and investment in flexible technologies this paper examines the implications of market structure on investment in flexible manufacturing systems fms we analyze a two stage game in which firms choose between a flexible and a less flexible technology in the first stage then choose production quantities in the second stage in equilibrium a large proportion of fms firms is associated with more concentrated markets our model predicts that a larger market and or a more differentiated product results in a higher proportion of fms firms being sustained these predictions are empirically supported using cross section industry level data from both the us and japan

what drives carbon dioxide emissions in the long run evidence from selected south asian countries abstract this study empirically investigates the relationship between co 2 emission and four of its potentially contributing factors i e energy consumption income trade openness and population using time series data from 1971 to 2013 on five selected economies of south asia after confirming that all the series are stationary using unit root test process the study incorporates three different and advance panel cointegration tests i e pedroni kao and johansen fisher panel cointegration all the panel cointegration tests confirm that all the variables cointegrated the long run association between the variables is checked using fmols grouped and individual cross section country in the panel the fmols grouped results show that energy consumption trade openness and population increases environmental degradation in the panel countries with exception of income which has negative impact and sounds the existence of environmental kuznet curve between income and emission the innovative accounting approach using variance decomposition test and impulse response function is applied to examine the causality amongst the underlined vectors the results show that there is bidirectional causality between energy consumption and trade openness and uni directional causality running from energy consumption trade openness and population to co 2 emission the results enumerate that the energy consumption and population density will increase in long run and foresee further environmental degradation in the region

strategic technology choice and capacity investment under demand uncertainty this paper studies the impact of competition on a firm s choice of technology product flexible or product dedicated and capacity investment decisions specifically we model two firms competing with each other in two markets characterized by price dependent and uncertain demand the firms make three decisions in the following sequence choice of technology technology game capacity investment capacity game and production quantities production game the technology and capacity games occur while the demand curve is still uncertain and the production game is postponed until after the demand curve is revealed we develop best response functions for each firm in the technology game and compare how a monopolist and a duopolist respond to a given flexibility premium we show that the firms may respond to competition by adopting a technology which is the same as or different from what the competitor adopts we conclude that contrary to popular belief flexibility is not always the best response to competition flexible and dedicated technologies may coexist in equilibrium we demonstrate that as the difference between the two market sizes increases a duopolist is willing to pay less for flexible technology whereas the decision of a monopolist is not affected further we find that a firm that invests in flexibility benefits from a low correlation between demands for two products but the extent of this benefit differs depending on the competitor s technology choice our results indicate that higher demand substitution may or may not promote the adoption of flexibility under competition whereas it always facilitates the adoption of flexibility without competition finally we show that contrary to intuition as the competitor s cost of capacity increases the premium a flexible firm is willing to pay for flexibility decreases

optimal investment in product flexible manufacturing capacity this paper presents a model and an analysis of the cost flexibility tradeoffs involved in investing in product flexible manufacturing capacity flexible capacity provides a firm with the ability to respond to a wide variety of future demand outcomes but at the expense of the increased cost of acquiring flexible manufacturing capacity as compared with dedicated or nonflexible capacity we formulate the product flexible manufacturing capacity investment decision as a two stage stochastic program in the first stage the firm must make its investment decision in manufacturing capacity before the resolution of uncertainty in product demand in the second stage after demand for products are known the firm implements its production decisions constrained by the first stage investments the main contributions of this paper are threefold first we develop a model of the firm s flexible manufacturing investment decision that conceptually captures some of the key characteristics of this complex decision probl

global facility network design in the presence of competition abstract we study the facility network design problem for a global firm that is a monopolist seller in its domestic market but faces local competition in its foreign market the global firm produces in the face of demand and exchange rate uncertainty but can postpone localization and distribution of the output until after uncertainties are resolved the competitor in the foreign market however enjoys the flexibility of postponing all production activities until after uncertainties are resolved the two firms engage in an ex post cournot competition in the foreign market we consider three potential network configurations for the global firm under a linear demand function we provide the necessary and sufficient condition that one of the three networks is the global firm s optimal choice and explore how the presence of foreign competition affects the sensitivity of the global firm s design to various cost parameters and market uncertainties

capacity choice under uncertainty in a duopoly with endogenous exit abstract applying the real options framework this article investigates the investment decision of the entrant given that an incumbent is already active both firms have an option to exit this market if the demand level falls too low the combination of three decision components capacity choice entry and exit timing results into multiple trigger strategies for the entrant in particular in the presence of a large incumbent it can either choose to coexist with its rival in a duopoly or eventually monopolize the market by installing a sufficiently large capacity the former scenario is realized when the market is large while the latter occurs when the market is small when the market is of intermediate size a hysteresis region emerges where the entrant does not take any actions and prefers to postpone investment

entry deterrence by timing rather than overinvestment in a strategic real options framework this paper examines a dynamic incumbent entrant framework with stochastic evolution of the inverse demand in which both the optimal timing of the investments and the capacity choices are explicitly considered we find that the incumbent invests earlier than the entrant and that entry deterrence is achieved through timing rather than through overinvestment this is because the incumbent invests earlier and in a smaller amount compared to a scenario without potential entry if on the other hand the size of the investment is exogenously given the investment order changes and the entrant invests before the incumbent does

new product introduction and capacity investment by incumbents effects of size on strategy we analyze a duopoly where capacity constrained firms offer an established product and have the option to offer an additional new and differentiated product we show that the firm with the smaller capacity on the established market has a higher incentive to innovate and reaches a larger market share on the market for the new product an increase in capacity of the larger firm can prevent its competitor from innovating whereas an increase in capacity of the smaller firm cannot prevent innovation of its larger competitor in equilibrium the firm with smaller capacity on the established market might outperform the larger firm with respect to total payoffs

flexible service capacity optimal investment and the impact of demand correlation we consider a firm that provides multiple services using both specialized and flexible capacity the problem is formulated as a two stage single period stochastic program the firm invests in capacity before the actual demand is known and optimally assigns capacity to customers when demand is realized sample applications include a car rental company s use of mid sized cars to satisfy unexpectedly high demand for compact cars and an airline s use of business class seats to satisfy economy class demand we obtain an analytical solution for a particular case when services may be upgraded by one class the simple form of the solution allows us to compare the optimal capacities explicitly with a solution that does not anticipate flexibility given that demand follows a multivariate normal distribution we analytically characterize the effects of increasing demand correlation on the optimal solution for the case with two customer classes the effects of demand correlation are intuitive increasing correlation induces a shift from flexible to dedicated capacity when there are three or more classes there are also adjustments to the resources not directly affected by the correlation change as correlation rises these changes follow an alternating pattern for example if the optimal capacity of one resource rises then the optimal capacity of the adjacent resource falls these results make precise conjectures based on numerical experiments that have existed in the literature for some time

the value of flexibility in make to order systems the effect of demand correlation we consider a manufacturer of mass customized modular products who orders components under demand uncertainty and sets prices produces to order and trades excess components in a secondary market after this uncertainty is resolved the sequence of events reflects in a parsimonious fashion the considerable reduction in demand uncertainty between the procurement stage and the selling season typical of industries with long supply lead times and short product life cycles we prove that in contrast to conventional wisdom the value of production flexibility and expected profit increase with demand correlation if and only if commonality between the corresponding products does not exceed a threshold we also prove that the value of flexibility and expected profit may each increase or decrease with demand variability depending on demand correlations and component commonalities across the entire product line finally we prove that when demand shocks are independent the optimal product prices are positively correlated if and only if the degree of commonality between the corresponding products exceeds a threshold

strategic choice of flexible production technologies and welfare implications this paper examines the market conditions under which firms would choose a more flexible production technology with respect to product design the authors use a two stage game in which firms choose between flexible and less flexible production technologies in the first stage and subsequently choose output they find that consumers would benefit from the introductions of flexible production technologies in their model the authors also find that the production technology game is a prisoner s dilemma when firms invest in flexible manufacturing systems they derive the conditions under which the resulting equilibria are efficient copyright 1990 by blackwell publishing ltd

process flexibility in supply chains process flexibility whereby a production facility can produce multiple products is a critical design consideration in multiproduct supply chains facing uncertain demand the challenge is to determine a cost effective flexibility configuration that is able to meet the demand with high likelihood in this paper we present a framework for analyzing the benefits from flexibility in multistage supply chains we find two phenomena stage spanning bottlenecks and floating bottlenecks neither of which are present in single stage supply chains which reduce the effectiveness of a flexibility configuration we develop a flexibility measureg and show that increasing this measure results in greater protection from these supply chain inefficiencies we also identify flexibility guidelines that perform very well for multistage supply chains these guidelines employ and adapt the single stage chaining strategy of jordan and graves 1995 to multistage supply chains

technology investment under flexible capacity strategy with demand uncertainty abstract this paper investigates technology investment under flexible capacity strategy with demand uncertainty technology investment enables a firm to reduce its total production cost while flexible capacity strategy aims to reduce a firm s production waste by postponing production until demand is known adopting a general technology investment cost we examine how technology investment cost structure affects a firm s technology investment decisions we derive the conditions under which the firm will benefit from technology investment we show that the firm can increase its expected profit through technology investment only when the unit technology investment cost that varies inversely with the basic technology level is below a threshold however even though the technology investment cost is zero the benefit from the increase in technology level is limited furthermore we analytically determine the optimal technology levels and establish their relationships under different technology investment cost structures our findings will help firms evaluate various technology investment options and choose the most proper one