Flexible capacity strategy with multiple market periods under demand uncertainty and investment constraint
We model a flexible capacity strategy with n market periods and demand uncertainty. We formulate and obtain the optimal solution of this 3-stage problem. We obtain the formulae of the two thresholds for the unit capacity cost. We explore and obtain the endogenous safety production level. A firm gains profit only when the planning horizon is longer than a threshold.
flexible capacity strategy multiple market periods demand uncertainty capacity constraints