CAPACITY EXPANSION IN STAGES UNDER BUDGET CONSTRAINT.

Staged capacity expansion of a single facility under budget constraint is mathematically formulated and analyzed. It is suggested that there are some fundamental units for staged capacity expansion models. The fundamental unit is defined as a model which possesses a minimum set of conditions under which staged expansion is favorable. The excess-demand model, one of the fundamental units, is defined as the model with the set of conditions: (1) economies of scale (2) budget constraint, and (3) excessive demand (to the capacity of the facility). An explicit expression of the optimum number of stages is derived for the model.