Capacity Investment in a New Production Location
研究企业在新生产地点进行产能投资和生产的决策问题，发现成本或需求波动更大时企业利润可能更高，并分析了保留现有地点的价值。
ABSTRACT Firms proactively search for low‐cost production locations to enjoy cost‐based advantages. In this article, we develop a two‐stage stochastic program to study a firm's capacity investment and production decisions about the exploration of new production locations. In the first stage, the firm determines how much capacity to build at the new location, and in the second stage, after the product demand and the production cost at the new location have been observed, the firm determines the optimal production quantities. We first characterize the firm's optimal decisions and then examine how the optimal capacity level and firm profit are affected by the key parameters. We find that the firm may be better off when either the production cost or the demand is more variable. Using numerical analyses, we also investigate the value of retaining the existing location, and our results demonstrate that retaining the existing location obtains the highest value when the market size is large, the consumers are insensitive to price, the market demand is highly uncertain, or the variability of the production cost at the new location is either sufficiently high or sufficiently low. Finally, we extend our baseline setting in two directions: one in which the firm makes the production decision prior to demand realization, and the other in which there is a finite capacity at the existing location. For both extensions, we demonstrate the robustness of the results obtained for the baseline setting.