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Batch process and transfer decisions in foreign market: a real options model

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  • Chin‐Tsai Lin
  • Cheng‐Ru Wu

Abstract

This investigation extends the constant elasticity of substitution (CES) batch process production model of Lin et al. (J. Management syst. 2002; 9: 173) for an uncertain exchange rate by considering an export‐oriented manufacturer who can decide to switch freely between domestic and foreign locations. The export‐oriented manufacturer is risk averse and has rational expectations. As the entry cost declines, the export‐oriented manufacturer's entry trigger for the CES production function increases for transferring from a domestic and to a foreign location. Additionally, the manufacturer's exit trigger for CES production function increases for transferring from a foreign and to a domestic location. Moreover, the exit cost resembles the entry cost. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • Chin‐Tsai Lin & Cheng‐Ru Wu, 2003. "Batch process and transfer decisions in foreign market: a real options model," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 19(2), pages 121-131, April.
    • Handle: RePEc:wly:apsmbi:v:19:y:2003:i:2:p:121-131
    DOI: 10.1002/asmb.487
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    Cited by:

    1. Sergio Vergalli, 2011. "Entry and Exit Strategies in Migration Dynamics," Journal of Labor Research, Springer, vol. 32(4), pages 362-389, December.
    2. Cheng-Ru Wu & Chin-Tsai Lin & Huang-Chu Chen, 2009. "Integrated environmental assessment of the location selection with fuzzy analytical network process," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(3), pages 351-380, May.
    3. Chen-Ru Wu & Chin-Tsai Lin, 2007. "Optimizing Location Among Three Countries Under Exchange Rate Uncertainty: Applying Real Options," Quality & Quantity: International Journal of Methodology, Springer, vol. 41(1), pages 1-17, February.

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