How to escape a declining market : capacity investment or exit?How to escape a declining market : capacity investment or exit?
Faculty of Applied Economics
2015Wuhan :Wuhan univ technology press, 2015
European journal of operational research. - Amsterdam
(2015), p. 338-341
University of Antwerp
This paper considers a firm that faces a declining profit stream for its established product. The firm has the option to invest in a new technology with which it can produce an innovative product while having the option to exit at any point in time. In the presence of an exit option, earlier work determined the optimal timing to invest, where it was shown that higher uncertainty might accelerate investment timing. In the present paper the firm also decides on capacity. This extension leads to monotonicity, i.e. higher uncertainty delays investment timing. We also find that higher potential profitability of the innovative product market increases the incentive to invest earlier, where, however, we get the counterintuitive result that the firm invests in smaller capacity. Finally, if quantity has a smaller negative effect on price, the firm wants to acquire a larger capacity at a lower investment threshold. (C) 2016 Elsevier B.V. All rights reserved.
At present, the field of theoretical research has not reached an agreement on a unified standard of the indicator system of the industry cluster degree. This paper summarizes the existing studies of industrial clusters and built up the calculation indicator system of the cultural creative industry cluster by using the general designing principles. An exclusive calculation indicator system in terms of the static and dynamic indicators is built on base of the industrial characteristics. It provides the calculation criteria from the macro and micro perspectives. The quantitative results can grasp the industrial inherent regularity and reflect the regional technology spillovers of the industry cluster.