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The Economic Value of Resource Flexibility

Li, Lode (1985) The Economic Value of Resource Flexibility. Social Science Working Paper, 570. California Institute of Technology , Pasadena, CA. (Unpublished)

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The economic value of resource flexibility is discussed in the context of a model of a two-stage production process with stochastic variability. A unique optimal barrier policy is characterized with any level of capacity flexibility. The more flexible the capacities, the lower the optimal inventory limit and the higher the profit of the producer. A diffusion approximation of the model is also discussed.

Item Type:Report or Paper (Working Paper)
Additional Information:I gratefully acknowledge the insightful suggestions of Erhan Cinlar and Michael J. Harrison.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:570
Record Number:CaltechAUTHORS:20170915-151842832
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81499
Deposited By: Jacquelyn Bussone
Deposited On:19 Sep 2017 22:05
Last Modified:03 Oct 2019 18:43

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