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ARTICLE TITLE

van Mieghem, Jann A., Dada, Maqbool, "Price versus production postponement: Capacity and competition", Management Science, Vol. 45, No. 12, Dec 1999, pp. 1631-1649.

 

ABSTRACT

A comparative analysis of possible postponement strategies is presented in a two-stage decision model where firms make three decisions: capacity investment, production (inventory) quantity, and price. Typically, investments are made while the demand curve is uncertain. It is shown how competition, uncertainty, and the timing of operational decisions influence the strategic investment decision of the firm and its value. in contrast to production postponement, price postponement makes the investment and production decisions relatively insensitive to uncertainty.