Capacity planning under uncertainty: An Asian option approach

Tarik Driouchi, David Bennett, Giuliana Battisti

Research output: Unpublished contribution to conferenceUnpublished Conference Paperpeer-review


This short paper introduces the concept of Asian options in the capacity choice literature. We develop a simple model for optimal capacity setting under average demand uncertainty for a single firm. When the firm faces moderate or significant stochastic demands in its current product line, expanding capacity is beneficial. If the demand is extremely stochastic, a capacity lag or reduction is more profitable.
Original languageEnglish
Number of pages8
Publication statusPublished - 2006
Event10th Annual International Conference - New York, United States
Duration: 14 Jun 200617 Jun 2006


Conference10th Annual International Conference
Country/TerritoryUnited States
CityNew York


  • arithmetic Asian options
  • fixed strike
  • optimal capacity


Dive into the research topics of 'Capacity planning under uncertainty: An Asian option approach'. Together they form a unique fingerprint.

Cite this