The Finnish Journal of Business Economics 4/1976, 454-476.
This paper suggests a two-stage linear programming approach to
multiperiod joint production and financial decisions of the firm
under a probabilistic future. It is demonstrated that it is not
necessary to increase the size of the model exponentially in the
multiperiod case. The two-stage nature of the model is retained even
with the instruction of multiple time periods. The application of
a multi-stage structure is avoided by defining only a single
revelation of the future state of the world instead of the several
successive revelations conventionally defined in similar
multi-period problems. Also the preparation of prediction is made
easier with the application of the present approach. Hence the
pragmatic applicability of the model for joint production and
financial planning under risk is enhanced with the smaller model
size and the relaxation of the requirements of the forecasts needed.
Keywords: linear programming, uncertainty in quantitative planning,
joint production and financial planning, quantitative methods in
budgeting
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