Firms proactively search for low-cost production locations to enjoy cost-based advantages. In this article, we develop a two-stage stochastic program to study a firm's capacity investment and production decisions about the exploration of new production locations. In the first stage, the firm determines how much capacity to build at the new location, and in the second stage, after the product demand and the production cost at the new location have been observed, the firm determines the optimal production quantities. We first characterize the firm's optimal decisions and then examine how the optimal capacity level and firm profit are affected by the key parameters. We find that the firm may be better off when either the production cost or the demand is more variable. Using numerical analyses, we also investigate the value of retaining the existing location, and our results demonstrate that retaining the existing location obtains the highest value when the market size is large, the consumers are insensitive to price, the market demand is highly uncertain, or the variability of the production cost at the new location is either sufficiently high or sufficiently low. Finally, we extend our baseline setting in two directions: one in which the firm makes the production decision prior to demand realization, and the other in which there is a finite capacity at the existing location. For both extensions, we demonstrate the robustness of the results obtained for the baseline setting.

中文翻译：

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新生产地点的产能投资

企业积极寻找低成本的生产地点，以享受基于成本的优势。在本文中，我们开发了一个两阶段随机程序来研究公司在新生产地点勘探方面的产能投资和生产决策。在第一阶段，企业确定在新地点建设多少产能，在第二阶段，在观察到新地点的产品需求和生产成本后，企业确定最佳生产数量。我们首先描述公司的最优决策，然后检验最优产能水平和公司利润如何受关键参数的影响。我们发现，当生产成本或需求变化更大时，企业可能会变得更好。使用数值分析，我们还研究了保留现有位置的价值，我们的结果表明，当市场规模大、消费者对价格不敏感、市场需求高度不确定或市场的可变性时，保留现有位置的价值最高。新地点的生产成本要么足够高，要么足够低。最后，我们将基线设置扩展到两个方向：一个是公司在需求实现之前做出生产决策，另一个是现有位置的产能有限。对于这两个扩展，我们证明了基线设置获得的结果的稳健性。消费者对价格不敏感，市场需求高度不确定，或者新地点生产成本的可变性要么足够高，要么足够低。最后，我们将基线设置扩展到两个方向：一个是公司在需求实现之前做出生产决策，另一个是现有位置的产能有限。对于这两个扩展，我们证明了基线设置获得的结果的稳健性。消费者对价格不敏感，市场需求高度不确定，或者新地点生产成本的可变性要么足够高，要么足够低。最后，我们将基线设置扩展到两个方向：一个是公司在需求实现之前做出生产决策，另一个是现有位置的产能有限。对于这两个扩展，我们证明了基线设置获得的结果的稳健性。另一个是现有位置的容量有限。对于这两个扩展，我们证明了基线设置获得的结果的稳健性。另一个是现有位置的容量有限。对于这两个扩展，我们证明了基线设置获得的结果的稳健性。