Optimum Strategy for Manufacturing Project of Specific Alloy for LNG Tankers Having Production Line Expansion Option under Uncertainty

Abstract

Due to the growing demand and increase in size of LNG (Liquefied Natural Gas) tankers throughout the world, increasing demand for larger size specific alloy membrane made of so called Invar (specific alloy of iron and nickel with extremely low thermal coefficient of expansion) is expected. Two major producers compete in a large scale Invar membrane business, as a leader and a follower, both having distinctive options for production line expansion in the future. Optimum strategies both for leader as well as follower in such a competitive duopoly condition have been derived based on real options analysis combined with game theory.