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Technical Note—Financial Market Approaches to Facility Location under Uncertainty

Author

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  • James E. Hodder

    (Stanford University, Stanford, California)

Abstract

This paper examines financial market approaches for facility location models incorporating uncertainty and risk aversion. As an example, it compares a model based on the Capital Asset Pricing Model with one using a mean-variance objective function. There are dramatically different computational implications; the financial market approach yields simpler procedures and is able to handle more complex problems. However, as discussed in the concluding observations, there are situations where the financial market perspective is less appropriate; consequently, the mean-variance model still has a role in analyzing facility location decisions.

Suggested Citation

  • James E. Hodder, 1984. "Technical Note—Financial Market Approaches to Facility Location under Uncertainty," Operations Research, INFORMS, vol. 32(6), pages 1374-1380, December.
    • Handle: RePEc:inm:oropre:v:32:y:1984:i:6:p:1374-1380
    DOI: 10.1287/opre.32.6.1374
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    Cited by:

    1. Jiao Wang & Lima Zhao & Arnd Huchzermeier, 2021. "Operations‐Finance Interface in Risk Management: Research Evolution and Opportunities," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 355-389, February.
    2. Rosenfield, Donald B., 1996. "Global and variable cost manufacturing systems," European Journal of Operational Research, Elsevier, vol. 95(2), pages 325-343, December.
    3. Liu, Zugang & Nagurney, Anna, 2011. "Supply chain outsourcing under exchange rate risk and competition," Omega, Elsevier, vol. 39(5), pages 539-549, October.
    4. Qing Ding & Lingxiu Dong & Panos Kouvelis, 2007. "On the Integration of Production and Financial Hedging Decisions in Global Markets," Operations Research, INFORMS, vol. 55(3), pages 470-489, June.
    5. K Sörensen, 2008. "Investigation of practical, robust and flexible decisions for facility location problems using tabu search and simulation," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(5), pages 624-636, May.
    6. Song, Sangcheol & Lee, Seung-Hyun & Makhija, Mona, 2015. "Operational hedging in foreign direct investments under volatile and divergent exchange rates across countries," Journal of World Business, Elsevier, vol. 50(3), pages 548-557.
    7. Taymaz, S. & Iyigun, C. & Bayindir, Z.P. & Dellaert, N.P., 2020. "A healthcare facility location problem for a multi-disease, multi-service environment under risk aversion," Socio-Economic Planning Sciences, Elsevier, vol. 71(C).
    8. Liu, Zugang & Wang, Jia, 2019. "Supply chain network equilibrium with strategic financial hedging using futures," European Journal of Operational Research, Elsevier, vol. 272(3), pages 962-978.
    9. Burak Kazaz & Maqbool Dada & Herbert Moskowitz, 2005. "Global Production Planning Under Exchange-Rate Uncertainty," Management Science, INFORMS, vol. 51(7), pages 1101-1119, July.

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