Optimal Capacity Investment, and Pricing Across International Markets Under Exchange Rate Uncertainty and Duopoly Competition

23 Pages Posted: 9 Apr 2018

See all articles by Murat Erkoc

Murat Erkoc

University of Miami - Department of Industrial Engineering

Huaqing Wang

Missouri Southern State University

Anas Ahmed

King Abdul Aziz University - Department of Industrial Engineering

Date Written: March 29, 2018

Abstract

We analyze an operational policy for a multinational manufacturer to hedge against exchange rate uncertainties and competition. We consider a single product and single period. Because of long-lead times, the capacity investment must done before the selling season begins when the exchange rate between the two countries is uncertain. we consider a duopoly competition in the foreign country. We model the exchange rate as a random variable. We investigate the impact of competition and exchange rate on optimal capacities and optimal prices. We show how competition can impact the decision of the home manufacturer to enter the foreign market.

Keywords: exchange rate uncertainty, pricing, market competition

Suggested Citation

Erkoc, Murat and Wang, Huaqing and Ahmed, Anas, Optimal Capacity Investment, and Pricing Across International Markets Under Exchange Rate Uncertainty and Duopoly Competition (March 29, 2018). Available at SSRN: https://ssrn.com/abstract=3152729 or http://dx.doi.org/10.2139/ssrn.3152729

Murat Erkoc

University of Miami - Department of Industrial Engineering ( email )

Coral Gables, FL 33124
United States

Huaqing Wang (Contact Author)

Missouri Southern State University ( email )

3950 E. Newman Road
Plaster Hall 309 k
Joplin, MO 64801
United States

Anas Ahmed

King Abdul Aziz University - Department of Industrial Engineering

Jeddah
Saudi Arabia

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
119
Abstract Views
763
Rank
422,206
PlumX Metrics