When a firm faces an uncertain demand, it is common to procure supply using some type of option in addition to spot purchases. A typical version of this problem involves capacity being purchased in advance, with a separate payment made that applies only to the part of the capacity that is...

This paper discusses the way that different operational characteristics including existing capacity, scale economies, and production policy have an important influence on the capacity outcomes when firms compete in the market place. We formulate a game-theoretical model where each firm has an...