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Optimal capacity expansion

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  • G. T. Howard
  • G. L. Nemhauser

Abstract

We consider the problem of temporal expansion of the capacity of, say, a plant or road given estimates of its desired usage (demand). The basic problem is: given a sequence of predicted demands for N time periods, determine the optimal investment decision in each period to minimize a linear investment cost and a strictly convex cost of capacity. The relationship between capacity and the investment decisions is assumed to be linear, but time varying. Constraints on both the individual decisions and on the sum of the decisions are considered. An algorithm for solving this problem is derived.

Suggested Citation

  • G. T. Howard & G. L. Nemhauser, 1968. "Optimal capacity expansion," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 15(4), pages 535-550, December.
    • Handle: RePEc:wly:navlog:v:15:y:1968:i:4:p:535-550
    DOI: 10.1002/nav.3800150407
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