Accession Number:

ADA089522

Title:

Solution of Stochastic Capital Budgeting Problems in a Multidivisional Firm.

Descriptive Note:

Technical rept.,

Corporate Author:

STANFORD UNIV CA DEPT OF OPERATIONS RESEARCH

Report Date:

1980-06-01

Pagination or Media Count:

28.0

Abstract:

In this paper we formulate an iterative solution procedure for stochastic capital budgeting problems in multidivisional firms where headquarters must arrive at an optimal divisional allocation of capital assets. It is assumed that headquarters allows for its responsibility by accepting a calculated risk that periodic budgetary constraints might be violated. This attitude towards risk is modelled via the use of chance constraints. The organization of the information exchange between headquarters and divisions is basically derived from the decomposition principle but possible variations are discussed. The proposed procedure allows the consideration of divisions who are cheating while submitting divisional information to headquarters. Author

Subject Categories:

  • Economics and Cost Analysis
  • Statistics and Probability

Distribution Statement:

APPROVED FOR PUBLIC RELEASE