Optimal timing of relocation

Pereira, José Azevedo; Couto, Gualter; Nunes, Cláudia

http://hdl.handle.net/10400.5/24684

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Authors

Pereira, José Azevedo

Couto, Gualter

Nunes, Cláudia

Abstract(s)

In this paper we tackle the problem of the optimal relocation policy for a firm that faces two types of uncertainty: one about the moments in which new (and more efficient) sites will become available; and the other regarding the degree of efficiency improvement inherent to each one of these new, yet to be known, potential location places. In particular, we derive results concerning the expected optimal timing for relocation, the corresponding volatility and the value of the firm under the optimal relocation policy. Impacts on the final results driven by the characteristics of the firm´s original location site, the market environment and the way in which risk is modeled, are studied numerically. The overall results are in line with economic intuition

Keywords

Globalization Relocation Real Options Decision Problem Double Poisson Process Optimal Timing Truncated-Exponential Distribution Gamma Distribution

URI

http://hdl.handle.net/10400.5/24684

Citation

Pereira, José Azevedo; Gualter Couto and Cláudia Nunes. (2007). “Optimal timing of relocation”. CEEAplA – Centro de Estudos de Economia Aplicada do Atlântico, WP No. 04/2007.