Optimal timing of investments in advanced manufacturing systems under competition

Abstract

Large initial investment in advanced manufacturing systems (AMS) makes it imperative to develop economic jusrificution methods. Once the new system has been properly justified, a critical issue facing the firm is the optimal timing of the installation in an industry. In this paper we use a gametheoretic model by which the optimal timing of the investments in AMSs is analysed. The existence of timing equilibria is demonst ratcd and simple decision rules of optimal strategy are provided. Economic interpretations of the decision rules are subsequently made clear. Finally, illustrative examples are used to demonstrate the correctness and usefulness of the analysis.