optimal dynamic pricing of inventories with stochastic demand over finite horizons in many industries managers face the problem of selling a given stock of items by a deadline we investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm s objective is to maximize expected revenues examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry which markets space such as seats on airline flights cabins on vacation cruises and rooms in hotels that become worthless if not sold by a specific time we formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp price as a function of the stock level and the length of the horizon for a particular exponential family of demand functions we find the optimal pricing policy in closed form for general demand functions we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity finally we extend our results to the case where demand is compound poisson only a finite number of prices is allowed the demand rate is time varying holding costs are incurred and cash flows are discounted the initial stock is a decision variable and reordering overbooking and random cancellations are allowed

on the structure of lost sales inventory models we provide a new approach to the structural analysis of the standard lost sales inventory system this approach is we think easier to work with than the original one we also derive new bounds on the optimal policy then we show that more variable demand leads to higher cost finally we extend the analysis to several important variations of the basic model

turnover in the afdc population an event history analysis the control group of families with female heads from the denver income maintenance experiment is utilized in this analysis of afdc turnover this study uses event history techniques a methodology that is more appropriate for exploring welfare dynamics than the logit approach of earlier work increases in age and the wage have significant negative effects on the rate of entering afdc a higher guarantee raises this rate significantly age and the guarantee have significant effects with opposite signs on the exit rate other variables are not systematically related to turnover the estimates are applied to projected changes in lengths of time spent on and off afdc and in afdc caseloads due to changes in the explanatory variables

sales and operations planning a research synthesis abstract despite the growing body of literature on sales and operation planning s op efforts to synthesise the overall state of the art of research in this area are limited within this context this paper provides a systematic review of the literature on s op the purpose of this systematic review is twofold i to integrate the highly dispersed work on s op in order to identify and analyse s op as a business process and ii to assemble quantitative evidence of its impact on the performance of the firm a literature search framework is proposed with 271 papers reviewed and classified the framework embraces s op context information inputs and goals structure and processes outcomes and results the major expected outcome in most papers was a cross functional integration of plans although few studies report on the integration of finance plans into s op despite the existence of common process descriptors and definitions of s op there is a lack of unifying frameworks for maturity models measurement of s op and constructs related to the firm s performance the need for additional scientifically sound survey or case study research on s op is emphasised this paper contributes to a better understanding of s op s role as a determinant of firm s performance in the supply chain

joint management of capacity and inventory in make to stock production systems with multi class demand we evaluate the benefits of coordinating capacity and inventory decisions in a make to stock production environment we consider a firm that faces multi class demand and has additional capacity options that are temporary and randomly available we formulate the model as a markov decision process mdp and prove that a solution to the optimal joint control problem exists for several special cases we characterize the structure of the optimal policy for the general case however we show that the optimal policy is state dependent and in many instances non monotone and difficult to implement therefore we consider three pragmatic heuristic policies and assess their performance we show that the majority of the savings originate from the ability to dynamically adjust capacity and that a simple heuristic that can adjust production capacity based on workload fluctuation but uses a static production rationing policy can result in significant savings

production planning and pricing policy in a make to stock system with uncertain demand subject to machine breakdowns abstract we consider a make to stock system served by an unreliable machine that produces one type of product which is sold to customers at one of two possible prices depending on the inventory level at the time when a customer arrives i e the decision point the system manager must determine the production level and selling price at each decision point we first show that the optimal production and pricing policy is a threshold control which is characterized by three threshold parameters under both the long run discounted profit and long run average profit criteria we then establish the structural relationships among the three threshold parameters that production is off when inventory is above the threshold and that the optimal selling price should be low when inventory is above the threshold under the scenario where the machine is down or up finally we provide some numerical examples to illustrate the analytical results and gain additional insights

the added worker effect the term added worker effect usually refers to a temporary increase in the labor supply of married women whose husbands have become unemployed this paper presents a new approach to the empirical study of the added worker effect which emphasizes the role of employment uncertainty and credit constraints in generating short run participation and employment patterns the estimates are based on employment transition probabilities rather than static measures of labor supply and are used in a dynamic simulation of changes in the employment and participation rates of wives following an exogenous increase in unemployment among their husbands the results show a small but significant added worker effect at least for white families and suggest that the apparent disagreement among previous studies may stem from different approaches to measuring responses to a transitory event such as an unemployment spell

optimal dynamic scheduling policy for a make to stock production system this paper considers the dynamic scheduling problem of a single server make to stock queue with two products for the case of poisson demands and exponential production times we show that it is optimal to produce the product with the larger b index when it is backordered if the production times are identically distributed the optimal policy can further be characterized by monotone switching curves we also prove that a base stock policy coupled with a switching curve is optimal for some initial inventory levels a simple linear switching rule for determining production priority is proposed and compared with other heuristic policies in a computational experiment

dynamic capacity management with substitution we examine a multiperiod capacity allocation model with upgrading there are multiple product types corresponding to multiple classes of demand and the firm purchases capacity of each product before the first period within each period after demand arrives products are allocated to customers customers who arrive to find that their product has been depleted can be upgraded by at most one level we show that the optimal allocation policy is a simple two step algorithm first use any available capacity to satisfy same class demand and then upgrade customers until capacity reaches a protection limit so that in the second step the higher level capacity is rationed we show that these results hold both when all capacity is salvaged at the end of the last demand period as well as when capacity can be replenished in the latter case an order up to policy is optimal for replenishment although finding the optimal protection limits is computationally intensive we describe bounds for the optimal protection limits that take little effort to compute and can be used to effectively solve large problems using these heuristics we examine numerically the relative value of strictly optimal capacity and dynamic rationing the value of perfect demand information and the impact of demand and economic parameters on the value of optimal substitution

stock rationing under service level constraints in a vertically integrated distribution system this paper addresses a rationing problem in a two level vertically integrated distribution system composed of one manufacturer and several retail points the motivating case developed in the vending machine sector and modeled as a newsvendor like problem is representative of many real settings where short term changes in demand can be substantial while capacity modification is not a viable option the paper provides an analytical discussion of the problem from two different standpoints a pure profit maximization perspective and a minimum service level perspective both subject to a product availability constraint that affects the service level the company can provide and the related expected profit by analyzing the lagrangean formulation of the problem we devise efficient computational procedures based on dichotomy search to find the optimal allotments to retailers maximizing the expected profit and ensuring a minimum service level then we extend the analysis to the evaluation of the highest service level that can be provided under a product availability constraint we identify conditions such that the proposed search procedures succeed in finding the optimal solutions as well as bounds for the search domains the proposed approach is legitimated under several demand distribution functions subject to a few commonly adopted restrictions that encompass many of the usually adopted continuous distributions finally the paper presents a three step decision making framework using the proposed procedures summarizing the decision paths the manufacturer might follow in order to optimize the allocation decision

analysis of an industrial component commonality problem we discuss a case study of an industrial production marketing coordination problem involving component commonality for the product line considered the strategic goal of the company is to move from the current low volume market to a high volume market the marketing department believes that this can be achieved by substantially lowering the end products prices however this requires a product redesign to lower production costs in order to maintain profit margins the redesign decision involves grouping end products into families all products within one family use the same version of some components this paper fits in the stream of recent literature on component commonality where the focus has shifted from inventory cost savings to production and development cost savings further we consider both costs and revenues leading to a profit maximization approach the price elasticity of demand determines the relationship between the price level and number of units sold consequently we integrate information from different functional areas such as production marketing and accounting we formulate the problem as a net present value investment decision we propose a mixed integer nonlinear optimization model to find the optimal commonality decision the recommendation based on our analysis has been implemented in the company in addition the application allows us to experimentally validate some claims made in the literature and obtain managerial insights into the trade offs

on the effect of demand randomness on inventories and costs we explore analytically cardinal effects of the extent of demand randomness on optimal inventory levels and the associated expected costs to model changes in demand randomness we make extensive use of a mean preserving transformation commonly used in probabilistic microeconomics as well as the notion of risk pooling aggregating independent demands for the single period news vendor model the order quantity and associated costs are shown to depend on the randomness parameter in a simple and highly interpretable manner we show by a simple example that in some situations risk pooling might neither reduce inventories nor move them closer to the mean or median demand the managerial relevance of such analyses is discussed

a dynamic rationing policy for continuous review inventory systems stock rationing is an inventory policy that allows differential treatment of customer classes without using separate inventories in this paper we propose a dynamic rationing policy for continuous review inventory systems which utilizes the information on the status of the outstanding replenishment orders for both backordering and lost sales environments we conduct simulation studies to compare the performance of the dynamic policy with the static critical level and the common stock policies and quantify the gain obtained we propose two new bounds on the optimum dynamic rationing policy that enables us to tell how much of the potential gain the proposed dynamic policy realizes we discuss the conditions under which stock rationing both dynamic and static is beneficial and assess the value of the dynamic policy

a make to stock system with multiple customer classes and batch ordering this paper examines the impact of customer order sizes on a make to stock system with multiple demand classes we first characterize the manufacturer s optimal production and rationing policies when the demand is nonunitary and lost if unsatisfied we also investigate the optimal policies of a backorder system with two demand classes and fixed order sizes through a numerical study we show the effects of batch orders on the manufacturer s inventory cost as well as on the benefit of optimal stock rationing it is shown that batch ordering may reduce the manufacturer s overall cost if carefully introduced in a first come first served fcfs system with the same effective demand rates the customers order sizes also have a strong impact on the benefit of optimal stock rationing

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

centralized admission and production control in a two stage supply chain with single component and customized products abstract this paper considers a two stage supply chain that a make to stock facility produces a single component in anticipation of future demand and a make to order facility produces customized products using components with the option of to accept or reject each customer order we address the problem of centralizing the admission and production control that maximizes the supply chain s profit subject to the system costs using a markov decision process model we characterize the structure of the optimal admission control and production policy and establish the monotonic impact of system parameters on the optimal policy two heuristics are presented and their performance is numerically compared to the optimal policy under different operating conditions of the system

peers at work we study peer effects in the workplace specifically we investigate whether how and why the productivity of a worker depends on the productivity of coworkers in the same team using high frequency data on worker productivity from a large supermarket chain we find strong evidence of positive productiv ity spillovers from the introduction of highly productive personnel into a shift worker effort is positively related to the productivity of workers who see him but not workers who do not see him additionally workers respond more to the presence of coworkers with whom they frequently interact we conclude that social pressure can partially internalize free riding externalities that are built into many workplaces jel j24 l81 m54

managing an assemble to order system with after sales market for components abstract in this paper we consider an assemble to order manufacturing system producing a single end product assembled from n components and serving an after sales market for individual components components are produced in a make to stock fashion one unit at a time on independent production facilities production times are exponentially distributed with finite production rates the components are stocked ahead of demand and therefore incur a holding cost rate per unit demand for the end product as well as for the individual components occurs continuously over time according to independent poisson streams in order to characterize the optimal production and inventory rationing policies we formulate such a problem using a markov decision process framework in particular we show that the optimal component production policy is a state dependent base stock policy we also show that the optimal component inventory rationing policy is a rationing policy with state dependent rationing levels recognizing that such a policy is generally not only difficult to obtain numerically but also is difficult to implement in practice we propose three heuristic policies that are easier to implement in practice we show that two of these heuristics are highly efficient compared to the optimal policy in particular we show that one of the two heuristics strikes a balance between high efficiency and computational effort and thus can be used as an effective substitute of the optimal policy

dynamic pricing through discounts for optimizing multiple class demand fulfillment in a multiple customer class model of demand fulfillment for a single item we consider the use of dynamic price discounts to encourage backlogging of demand for customer classes denied immediate service customers are assumed to arrive over several stages in a period and customer classes are distinguished by their contractual price and sensitivity to discounts through dynamic programming we determine the optimal discounts to offer assuming a linear model for the sensitivity of customers to such inducements we show that customers are served in class order and allocation of inventory to demand is determined by considering the current number of customers backlogged as well as the current inventory position through comparison to a naive supplier allocating inventory first come first served with no discounting we show that profits are primarily influenced by the allocation of capacity and the use of price discounts primarily benefits the second class customers overall fill rate heuristics for implementation of the solution in real time settings are given

a stock rationing policy in a s s controlled stochastic production system with 2 phase coxian processing times and lost sales abstract this paper analyzes a s s controlled stochastic production system with multi class demands and lost sales demands in each class are assumed to arrive according to a poisson process and the time required to process an item is assumed to follow a 2 phase coxian distribution for each class a stock rationing level is set when customers arrive if the inventory level is lower than the predetermined rationing level the demands are lost for future demands with higher priorities a behavior of the production system is modeled as a continuous time markov chain and an efficient algorithm to calculate the steady state probability distribution of the system is proposed the average operating cost under the stock rationing policy is compared with the one without stock rationing numerical experiment shows that the proposed stock rationing policy reduces the average operating cost significantly depending on the system parameters

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

admission and inventory control of a single component make to order production system with replenishment setup cost and lead time abstract we consider the admission control and inventory management problems of a single component make to order production system components are purchased from suppliers in batches of fixed size subject to stochastic lead times and setup costs a control policy specifies when a batch of components is purchased and whether the demand for each mto production is accepted upon arrival we formulate the problem as a markov decision process mdp model and characterize the structure of optimal admission control and inventory replenishment policies we show that a state dependent base stock policy is optimal for the inventory replenishment although the mdp value function is not necessarily convex we also show that the optimal admission control can be identified as a lattice dependent policy a sensitivity analysis is conducted to show how the optimal policy changes as a function of the system parameters to effectively coordinate admission and inventory control decisions we propose simple implementable and yet effective heuristic policies our extensive numerical results suggest that the proposed heuristics can greatly help firms to effectively coordinate their admission and inventory control activities

labor supply response to welfare programs a dynamic analysis previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context using a sample of continuous longitudinal labor market histories estimates are derived for welfare nonwelfare differences in labor market flows among the states of employment unemployment and nonparticipation the estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients the findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment

integrated production and allocation policies with one direct shipping option we consider a single period inventory problem in which a supplier faces stochastic demands and customer specific waiting costs from multiple customers the objective is to develop integrated production allocation and distribution policies so that the total production and customer waiting costs are minimized we present an optimal policy for the two customer problem and derive a heuristic for a general problem based on the structural results of the two customer case we show numerically that the heuristic performs very well with error bounds of less than 2 on average while typical approximations may lead to significant sub optimality

revenue management approach to stochastic capacity allocation problem abstract to formulate stochastic capacity allocation problems in a manufacturing system the concept and techniques of revenue management is applied in this research it is assumed the production capacity is stochastic and hence its exact size cannot be forecasted in advance at the time of planning there are two classes of frequent and occasional customers demanding this capacity the price rate as well as the penalty for order cancellation caused by overbooking is different for each class the model is developed mathematically and we propose an analytical solution method the properties of the optimal solution as well as the behavior of objective function are also analyzed the objective function is not concave in general however we prove it is a unimodal function and by taking advantage of this property the optimal solution is determined

reduce shortage with self reservation policy for a manufacturer paying both fixed and variable stockout expenditure this study considers a single item make to stock system with continuous time production and inventory controls to meet bulk demand with an exponential inter arrival time a key issue in this system is the non convex shortage cost consisting of fixed and variable expenditures when the demand is not fully satisfied we propose a self reservation policy by building a markov decision process to minimize the overall cost we find that the optimal production control is still a base stock policy but the structure of the optimal self reservation policy is very complicated however if the effective outstanding variable shortage cost is sufficiently large the optimal self reservation policy has an easy form of reserve all or nothing our numerical examples indicate the optimal policy may reduce the total average cost by 47 on average

capacity rationing decision procedures with order profit as a continuous random variable abstract when expected demand is more than available capacity a make to order manufacturer should take the more profitable orders and reject the less profitable orders in order to better allocate its limited capacity and maximize its profit however various orders will arrive at different times in the future so the manufacturer cannot look at all the order inquiries at the same time and choose the most profitable ones when an order inquiry arrives the manufacturer must promptly determine without knowing exactly what the future orders might be whether to accept the order or to reject the order thus reserving the capacity for future more profitable orders this study focuses on such an order selection decision problem under the following assumptions 1 the arrival of future customer orders is a poisson process 2 the capacity requirement of a future customer order is a continuous random variable and 3 the profit per unit capacity used by an order is also a continuous random variable under the stochastic problem assumptions this study investigates two decision procedures that determine whether to accept or to reject an order inquiry based on the available information including 1 current available manufacturing capacity 2 capacity requirement by the order and 3 the profit per unit capacity of the order one procedure is called static probability capacity rationing decision procedure spcr the other one is called dynamic stochastic capacity rationing decision procedure dscr simulation experiments are conducted to validate the proposed procedures an optimal solution method that uses 0 1 knapsack problem formulation to obtain the decisions with perfect information is used to measure the effectiveness of the proposed procedures the results show that the approach utilizing dscr outperforms other approaches by providing the highest profit and is also very robust under various problem conditions

multi class dynamic inventory rationing with stochastic demands and backordering dynamic inventory rationing is considered for systems with multiple demand classes stationary stochastic demands and backordering in the literature dynamic programming has been often applied to address this type of problems however due to the curse of dimensionality computation is a critical challenge for dynamic programming in this paper an innovative two step approach is proposed based on an idea similar to the certainty equivalence principle first the deterministic inventory rationing problem is studied where the future demands are set to be the expectation of the stochastic demand processes the important properties obtained from solving the problem with the kkt conditions are then used to develop effective dynamic rationing policies for stochastic demands which gives closed form expressions for dynamic rationing thresholds these expressions are easy to calculate and are applicable to any number of demand classes numerical results show that the expressions are close to and provide a lower bound for the optimal dynamic thresholds they also shed light on important managerial insights for example the relation between different parameters and the rationing thresholds

design and evaluation of a dynamic capacity apportionment procedure abstract deploying a decision theory based approach we develop a heuristic for short term constrained capacity allocation to multiple product classes in make to order manufacturing attempting to maximize profit by discriminating between product classes efficacy of the heuristic is evaluated by comparing its performance to a base case and an upper bound under a wide variety of operational conditions such as variations in profit attractiveness capacity tightness customer order size structure customer order rate structure and demand coefficient of variation considering three different scenarios of time variant order rate of products the results indicate that the heuristic is effective in obtaining increased profit when capacity is very tight and products are well differentiated on average it yields an increase of 9 38 in total profit with a concomitant decrease of 0 85 in capacity utilization the results of this study serve to highlight the value of proactively seeking to differentiate products particularly when demand exceeds capacity

technical note optimal control of an assembly system with multiple stages and multiple demand classes we consider an assembly system with multiple stages multiple items and multiple customer classes the system consists of m production facilities each producing a different item items are produced in variable batch sizes one batch at a time with exponentially distributed batch production times demand from each class takes place continuously over time according to a compound poisson process at each decision epoch we must determine whether or not to produce an item and should demand from a particular class arise whether or not to satisfy it from existing inventory if any is available we formulate the problem as a markov decision process and use it to characterize the structure of the optimal policy in contrast to systems with exogenous and deterministic production lead times we show that the optimal production policy for each item is a state dependent base stock policy with the base stock level nonincreasing in the inventory level of items that are downstream and nondecreasing in the inventory level of all other items for inventory allocation we show that the optimal policy is a multilevel state dependent rationing policy with the rationing level for each demand class nonincreasing in the inventory level of all nonend items we also show how the optimal control problem can be reformulated in terms of echelon inventory and how the essential features of the optimal policy can be reinterpreted in terms of echelon inventory

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

managing an available to promise assembly system with dynamic short term pseudo order forecast we study an order promising problem in a multiclass available to promise atp assembly system in the presence of pseudo orders a pseudo order refers to a tentative customer order whose attributes such as the likelihood of an actual order order quantity and confirmation timing can change dynamically over time a unit demand from any class is assembled from one manufactured unit and one inventory unit where the manufactured unit takes one unit of capacity and needs a single period to produce an accepted order must be filled before a positive delivery lead time the underlying order acceptance decisions involve trade offs between committing resources production capacity and component inventory to low reward firm orders and reserving resources for high reward orders we develop a markov chain model that captures the key characteristics of pseudo orders including demand lumpiness nonstationarity and volatility we then formulate a stochastic dynamic program for the atp assembly system that embeds the markov chain model as a short term forecast for pseudo orders we show that the optimal order acceptance policy is characterized by class prioritization resource imbalance based rationing and capacity inventory demand matching in particular the rationing level for each class is determined by a critical value that depends on the resource imbalance level defined as the net difference between the production capacity and component inventory levels extensive numerical tests underscore the importance of the key properties of the optimal policy and provide operational and managerial insights on the value of the short term demand forecast and the robustness of the optimal policy this paper was accepted by martin lariviere operations management

earnings unemployment and the allocation of time over time since an individual s labour market history can be described by a markov chain in state space it is possible to calculate the steady states it is natural to interpret the steady state proportion in unemployment for a group of identical workers as the natural rate of unemployment for this group i e it is the expected proportion that would be employed if the environment were to remain constant it is shown how the natural rate of unemployment is different for different groups the model is estimated using data from a large u s income maintenance experiment the predictions of the model with some exceptions bear up well to confrontation by data the empirical findings also accord well with existing evidence on cross section studies of labour supply we find that labour force participation rates implied by the estimated models are positively related to earnings for all age sex and race groups as expected we demonstrate that the elasticities of the unemployment rates for all groups with respect to expected wage rates are negative and large in absolute value in the case of adults while the role of the wage in allocation of time is not novel the existing neoclassical labour literature uses static labour supply models to interpret participation rate studies

stock rationing in an m ek 1 make to stock queue this paper considers the stock rationing problem of a single item make to stock production system with several demand classes and lost sales when demand is poisson and processing time has an erlang distribution we show that a single state variable called work storage level can be employed to completely capture the information regarding inventory level and the status of current production the optimal rationing policy can be characterized by a sequence of monotone critical work storage levels for each demand class there exists a work storage level at or below which it is optimal to start rejecting the demand of this class in anticipation of future arrival of higher priority demands the optimal production policy can also be characterized by a critical work storage level our numerical examples indicate that a critical stock level policy which ignores information on the status of current production performs very well

optimal production and rationing policy of two stage tandem production system abstract the rationing literature has been so far oblivious to the fact that sellable items may not only be finished products but also intermediate products to manufacture subsequent sellable products we address this gap by considering an inventory rationing problem in a two product tandem make to stock production inventory system bulk demand arrives to a partial batch production system with exponentially distributed production time for each batch the management has to decide whether to run or stop production and whether the various classes of demand for both products intermediate product ip and finished product or end product ep have to be satisfied from available inventory or not in which case demand is lost in order to maximize the firm s expected profit we present the corresponding dynamic programming formulation and characterize the optimal policy the resulting policy depends on dynamic switching curves which define a thresholds to continue or discontinue production and b thresholds to satisfy or turn down incoming orders we identify the key value drivers and compare various heuristic policies through extensive numerical analyses

optimal policies for inventory systems with priority demand classes we consider a periodic review inventory system with two priority demand classes one deterministic and the other stochastic the deterministic demand must be met immediately in each period however the units of stochastic demand that are not satisfied during the period when demand occurs are treated as lost sales at each decision epoch one has to decide not only whether an order should be placed and how much to order but also how much demand to fill from the stochastic source the firm has the option to ration inventory to the stochastic source i e not satisfy all customer demand even though there is inventory in the system we first characterize the structure of the optimal policy we show that in general the optimal order quantity and rationing policy are state dependent and do not have a simple structure we then propose a simple policy called s k s policy wheres ands ordering policy determine when and how much to order whilek rationing policy specifies how much of the stochastic demand to satisfy we report the results of a numerical study which shows that this simple policy works extremely well and is very easy to compute

a threshold inventory rationing policy for service differentiated demand classes motivated by a study of the logistics systems used to manage consumable service parts for the u s military we consider a static threshold based rationing policy that is useful when pooling inventory across two demand classes characterized by different arrival rates and shortage stockout and delay costs the scheme operates as a q r policy with the following feature demands from both classes are filled on a first come first serve basis as long as on hand inventory lies above a threshold levelk once on hand inventory falls below this level low priority i e low shortage cost demand is backordered while high priority demand continues to be filled we analyze this static policy first under the assumption that backorders are filled according to a special threshold clearing mechanism structural results for the key performance measures are established to enable an efficient solution algorithm for computing stock control and rationing parameters i e q r andk numerical results confirm that the solution under this special threshold clearing mechanism closely approximates that of the priority clearing policy we next highlight conditions where our policy offers significant savings over traditional round up and separate stock policies encountered in the military and elsewhere finally we develop a lower bound on the cost of the optimal rationing policy numerical results show that the performance gap between our static threshold policy and the optimal policy is small in environments typical of the military and high technology industries

the role of inventory in delivery time competition the paper operationalizes the notion of shortage cost by considering the behavior of customers and competing firms and examines the role of inventory in response time competition we start with a single firm production control model in which customers are characterized by their preferences of price quality and delivery time the optimal production inventory policy and the optimal choice between make to order and make to stock operations are determined in simple newsboy like formulas the basic model is then extended to an n firm market game in which firms compete for orders from the aspect of early delivery one could think of this setting as an oligopoly racing market the analysis shows that competition can breed a demand for produce to stock just as other economic phenomena such as economies of scale uncertainty or seasonality can induce make to stock and that delivery time competition increases the buyer s welfare while decreasing the producer s welfare

accounting for complementary skill sets evaluating individual marginal value to a team in the national basketball association identifying an individual worker s contribution to firm production can be difficult in a team setting where spillovers in labor productivity exist among team members this paper studies a model of labor productivity where workers have heterogeneous abilities and can differently affect the productivity of their fellow teammates applying the model to the setting of the national basketball association nba i can identify the marginal value that a basketball player brings to a particular team lineup both through his own individual contributions and his complementary contribution to teammates productivity estimates from the model imply that teammates have a significant impact on individual player productivity and that taking into account spillovers across teammates is important to assessing both overall team productivity and an individual player s contribution to team productivity i then evaluate whether player complementarities are valued in the nba labor market in terms of higher salaries and find that they are undervalued and that players are instead paid mainly for their individual offensive production this creates an asymmetry between player incentives and the team objective to assess the size of this inefficiency the top trading cycle algorithm of shapley and scarf 1974 is used to identify a pareto optimal matching between players and teams that accounts for the complementarities between heterogeneous players skill sets jel j30 l25 l83 m51

putting tasks to the test human capital job tasks and wages using original representative survey data we document that analytical routine and manual job tasks can be measured with high validity vary substantially within and between occupations are significantly related to workers characteristics and are robustly predictive of wage differences between occupations and among workers in the same occupation we offer a conceptual framework that makes explicit the causal links between human capital endowments occupational assignment job tasks and wages which motivate a roy model of the allocation of workers to occupations we offer two simple tests of the model s gross predictions for the relationship between tasks and wages both of which receive qualified empirical support

the effect of commonality on safety stock in a simple inventory model we examine the effects of component commonality on optimal safety stock levels in a two product two level inventory model the criterion is to minimize system safety stock subject to a service level constraint although our model is specialized its analysis provides insights not available in other multilevel inventory models

component rationing for available to promise scheduling in configure to order systems abstract we address the problem of rationing common components among multiple products in a configure to order system with order configuration uncertainty the objective of this problem is to maximize expected revenue by implementing a threshold rationing policy under this policy a product is available to promise if fulfilling the order for the product will not cause the inventory of any one of its required components to fall below the component s threshold level for that product the problem is modeled as a two stage stochastic integer program and solved using the sample average approximation approach a heuristic is developed to generate good feasible solutions and lower bound estimates using industry data we examine the benefit of component rationing as compared to a first come first served policy and show that this benefit is correlated to the average revenue per product and the variability in the revenue across products whose components are constrained

interactions between workers and the technology of production evidence from professional baseball this paper examines how the effort choices of workers within the same firm interact with each other in contrast to the existing literature we show that workers can affect the productivity of their co workers based on income maximization considerations rather than relying on behavioral considerations such as peer pressure social norms and shame theoretically we show that a worker s effort has a positive effect on the effort of co workers if they are complements in production and a negative effect if they are substitutes the theory is tested using panel data on the performance of baseball players from 1970 to 2003 the empirical analysis shows that a player s batting average significantly increases with the batting performance of his peers but decreases with the quality of the team s pitching furthermore a pitcher s performance increases with the pitching quality of his teammates but is unaffected by the batting output of the team these results are inconsistent with behavioral explanations which predict that shirking by any kind of worker will increase shirking by all fellow workers the results are consistent with the idea that the effort choices of workers interact in ways that are dependent on the technology of production these findings are robust to controlling for individual fixed effects and to using changes in the composition of one s co workers in order to produce exogenous variation in the performance of one s peers

inventory rationing in a make to stock production system with several demand classes and lost sales this paper considers the stock rationing problem of a single item make to stock production system with several demand classes and lost sales for the case of poisson demands and exponential production times we show that the optimal policy can be characterized by a sequence of monotone stock rationing levels for each demand class there exists a stock rationing level at or below which it is optimal to start rejecting the demand of this class in anticipation of future arrival of higher priority demands a simple queueing model is analyzed to compute the operating cost of a rationing policy in a numerical study we compare the optimal rationing policy with a first come first served policy to investigate the benefit of stock rationing under different operating conditions of the system

a single product inventory model for multiple demand classes we consider a single product inventory system that serves multiple demand classes which differ in their shortage costs or service level requirements we assume a critical level control policy and a backorder clearing mechanism in which we treat a backorder for a lower priority class equivalent to a reserve stock shortfall for the higher priority class we show the equivalence between this inventory system and a serial inventory system based on this equivalence we develop a model for cost evaluation and optimization under the assumptions of poisson demand deterministic replenishment lead time and a continuous review q r policy with rationing we propose a computationally efficient heuristic and develop a bound on its performance we provide a numerical experiment to show the effectiveness of the heuristic and the value from a rationing policy finally we describe how to extend the model to permit service times and how to extend the model to a multi echelon setting

government spending and the distribution of economic growth in the united states total government spending and especially government social spending has increased greatly over the last 50 years what effect this has had on economic growth is a subject of intense debate among politicians policymakers and economists however there has been less attention paid to the distributional effects of government spending even though economic inequality has grown greatly over the last generation and much social spending is at least indirectly intended to reduce inequality the effects of government social spending in the united states on growth in family income at deciles of the income distribution were estimated the results suggested that social spending but not non social spending was likely to increase growth in family income per capita measured over 10 year intervals the largest effects of social spending were for deciles below the median income at no point in the distribution does social spending have a negative effect

spillovers complementarities and sorting in labor markets with an application to professional sports spillovers to productivity across workers may exist when workers produce in teams under certain conditions these spillovers may cause a worker s marginal product to differ across different firms empirical examination of professional basketball finds significant spillovers to offensive productivity but finds relatively little evidence for market sorting based on spillovers thus while teammate composition is important to a player s success there is no evidence for complementarity

yield and allocation management in a continuous make to stock system with demand upgrade substitution abstract yield management is crucial for high tech industries to reduce over production however it is very challenging for a manufacturer to make a yield decision under the circumstance of uncertain demand and stochastic product quality for example in semiconductor manufacturing industry products are produced in batches within certain production cycle time even if the same raw material is put into the production system the product qualities measured by performance usually are not identical due to random yield in the manufacturing process since products have overlapped performance specifications products of the same batch are classified into different classes according to their qualities at the allocation stage products with higher performance can substitute for demand for products with lower performance this type of production and allocation system can be specified as a make to stock system with single material multi products multi periods upward demand substitution under random yield and uncertain demands in order to maximize profit the manufacturer needs to decide on the optimal input material quantity and the optimal allocation policy the problem is formulated as a stochastic dynamic programming model because manufacturer s profit is affected by the allocation policies atp r allocation policy is proposed to help manufacturer make real time allocation decisions a numerical experiment shows that atp r allocation policy performs better than the traditional myopic allocation policy to reduce the computation burden involved in atp r allocation policy we further propose a simplified algorithm and our experimental studies provide proof of the effectiveness of the proposed simple algorithm

dynamic inventory rationing for systems with multiple demand classes and general demand processes we consider the dynamic rationing problem for inventory systems with multiple demand classes and general demand processes we assume that backorders are allowed our aim is to find the threshold values for this dynamic rationing policy for single period systems dynamic critical level policy is developed and the detailed cost approximation subject to this policy is derived for multiperiod systems a dynamic rationing policy with periodic review is proposed the numerical study shows that our dynamic critical level policies are close to being optimal for various parameter settings

team effects on compensation an application to salary determination in the national hockey league leo h kahane studies of salary determination largely model pay as a function of the attributes of the individual and the workplace i e employer size job characteristics and so forth this article empirically investigates an additional factor that may influence individual pay specifically coworker productivity data from professional sports are used to evaluate this question because both salary and teammate performance measures are readily available we find that team attributes have both direct effects on an individual s pay and indirect effects through altering the rates at which individual player productive characteristics are valued jel j31 l83 i introduction when complementary exists between labor inputs individual productivity may be poorly measured by treating the individual worker separately from the character of the organization or team within which he works namely individual productivity may vary when working in different settings to the extent that coworkers offer different degrees of assistance 1 if such complementary between human capital inputs is present say a team dynamic it suggests the possible existence of both team and individual effects on productivity and hence compensation empirical analysis of team effects has been hindered by the lack of data on individuals and their coworkers including managers one source though that contains much of this requisite information is data on professional sports teams in this article we exploit this unique attribute of professional sports data in order to empirically assess the effect of complementarities between labor inputs on individual compensation specifically we use a team sport setting to situate the worker in an organizational environment where we can observe the impact of coworkers on individual productivity thereby allowing us to examine the separate effects of individual and team productivity on salary determination the general question asked is whether individual attributes are valued or rewarded differently in different work environments or in our specific case on different teams this study will investigate these questions by empirically assessing the effects of coworker productivity that is the effects of the qual ity productivity of teammates on individual compensation although a number of different highly team oriented sports would serve our purpose such as basketball this particular study uses data from professional hockey to investigate team effects on compensation 2 the remainder of the article is organized as follows section ii outlines the empirical framework used to analyze the posited team effects and discusses some of the theoretical issues relating to team effects on compensation section iii describes the data used in the analysis section iv reports the empirical results and section v reports our conclusions and directions for further work ii team and coworker effects as noted above the goal of this study is to evaluate empirically whether average coworker attributes 1 affect individual salaries 2 affect the rate at which individual attributes are valued by the firm and 3 are complementary inputs to the attributes of individual team members the question arises though as to why we might expect on theoretical grounds that individual players would earn any part of the team s contribution the classic model of alchian and demsetz 1972 suggests that the capitalist manager will reap the returns from any incremental team output as the primary function of the manager is to discover complementarities between inputs and enhance organizational output by optimally combining resources and to monitor effort so as to reduce shirking as a result the manager will capture all of the returns that are not specific to the inputs in which case we would not expect to observe team effects on individual compensation yet although a manager acting as the residual claimant is one solution to the problem of reducing shirking in the context of complementary inputs whose effort is difficult to monitor other models suggest that it may be desirable to compensate team members based on the value of team output in order to provide optimal incentives for effort for example see akerlof 1982

inventory policies for systems with stochastic and deterministic demand we consider a periodic review inventory system with demand arriving simultaneously from a deterministic source and a random source the deterministic demand has to be satisfied immediately and the stochastic demand can be backordered assuming that the stochastic demand is never backlogged if there is stock in the system we prove that a modified s s policy is optimal under general conditions if there is a setup cost if there is a smoothing cost instead of the setup cost we observe that the problem corresponds to a standard model with one source of demand

labour supply impacts of effective welfare programme parameters a reanalysis we quantify the impact of effective welfare programme parameters on the labour supply of single female household heads the primary group of welfare recipients in the usa our panel of data is derived from the us census bureau s current population survey for the years 1979 to 1990 inclusive behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory we find that effective welfare gurantee levels and the effective tax rate on earned income both significantly decrease labour supply the marginal effects of these welfare programme parameters are economically small a us 1000 increase in the expected welfare guarantee level reduces annual labour supply by about 36 hours a 10 percentage point increase in the effective tax rate on earned income reduces annual labour supply by about 7 5 hours

production and inventory control of a single product assemble to order system with multiple customer classes we consider the optimal production and inventory control of an assemble to order system with m components one end product and n customer classes a control policy specifies when to produce each component and whenever an order is placed whether or not to satisfy it from on hand inventory we formulate the problem as a markov decision process and characterize the structure of an optimal policy we show that a base stock production policy is optimal but the base stock level for each component is dynamic and depends on the inventory level of all other components more specifically it is nondecreasing we show that the optimal inventory allocation for each component is a rationing policy with different rationing levels for different demand classes the rationing levels for each component are dynamic and also nondecreasing in the inventory level of all other components we compare the performance of the optimal policy to heuristic policies including the commonly used base stock policy with fixed base stock levels and find them to perform surprisingly well especially for systems with lost sales

the measurement of unemployment an empirical approach although the unemployment rate is one of the most widely cited and closely monitored economic statistics the definition and measurement of unemployment remain controversial an important issue is whether non employed persons who display a marginal attachment to the labor force for example those who are available for and desire work but are not searching for work should be classified as unemployed or non participants although this issue has been extensively debated it has never been tested empirically this paper carries out empirical tests of this and related hypotheses using a unique longitudinal data set from canada we find within the marginally attached a waiting group whose behavior indicates that they would be more appropriately classified as unemployed rather than out of the labor force the remainder of the marginally attached exhibit behavior between that of the unemployed and the balance of non participants suggesting that the desire for work among non searchers conveys substantial information about labor force attachment and future employment status our methods also apply to heterogeneity within the unemployed and we investigate behavioral variation linked to differences in job search methods and reasons for entry into unemployment although those using passive job search do exhibit behavior somewhat distinct from active searchers our results reject the practice of classifying passive job searchers as out of the labor force overall our results indicate that the non employed are very heterogeneous so that any single division into unemployment and out of the labor force is unlikely to fully capture the variety of degrees of labor force attachment this abstract was borrowed from another version of this item

reservation and allocation policies for influenza vaccines abstract this research investigates the impact of alternative allocation mechanisms that can be employed in the context of vaccine inventory rationing available vaccine inventory can be allocated to arrivals from high priority target groups such as healthcare professionals and low priority non target groups demand classes using partitioned allocation pa standard nesting sn and theft nesting tn in any one of the mechanisms a part of the available inventory is reserved for the exclusive use of the high priority demand class they differ however in how the unreserved portion of the inventory is utilized under pa demand from the high low priority class consumes only the reserved unreserved quantity under sn demand from the high priority class first consumes the reserved quantity once and if this quantity is exhausted high priority demand competes with low priority demand for the remaining inventory under tn the sequence of allocation is reversed both demand classes first compete for the unreserved inventory once this portion of inventory is exhausted high priority demand is fulfilled from the reserved inventory and low priority demand is rejected we develop service level probability of fulfilling the entire demand and fill rate fraction of demand fulfilled expressions for all three allocation mechanisms based on these expressions numerical analyses are conducted to illustrate which allocation mechanism a health planner should choose depending on the availability of vaccines and how the health planner should set the reserved quantity for the high priority class we observe that 1 there exist certain conditions under which one of the allocation mechanisms outperforms the others and 2 this effect is determined by the decision maker s choice of the performance measure

the impact of demand aggregation through delayed component allocation in an assemble to order system we consider an assemble to order system in which multiple products are assembled from a common component and a set of product dedicated components component capacities are chosen prior to a finite horizon selling season and the common component is allocated to the products based on observed demands we propose a collection of allocation mechanisms involving varying degrees of demand aggregation ranging from a scheme under which all demands are observed prior to making the allocation decision to allocations made for each arriving demand in this context we explore the impact of the allocation scheme on sales profits and capacity decisions including the degree of capacity imbalance we find that the benefit from increased demand aggregation is closely linked to the degree of capacity imbalance profit gains from delayed allocation tend to be higher in systems in which the optimal capacity portfolio is highly unbalanced when the allocation decision is made after observing all demands we develop insights into what detailed system parameters lead to the largest gains from demand aggregation and also explore the trade offs associated with the choice of an allocation scheme when customers exhibit impatience if the allocation scheme forces them to wait to be served this paper was accepted by ananth iyer operations and supply chain management

component commonality with service level requirements this paper extends recent results of baker et al baker k r m j magazine h l w nuttle 1986 the effect of commonality on safety stocks in a simple inventory model management sci 32 982 988 in understanding the impact of component commonality on stocking levels under service level constraints a model is formulated for an arbitrary number of products with general joint demand distribution the results obtained are not all intuitive while utilizing commonality is beneficial nothing general can be said about the resulting change in the components stock levels when the cost structure is of a particular simple form though some interesting general patterns do emerge we also discuss the case of using a service level measure where rationing of common components might be required and characterize the implied rationing rule

inventory sharing and rationing in decentralized dealer networks an increasing number of manufacturers have started to pursue a strategy that promotes inventory sharing among the dealers in their distribution network in this paper we analyze a decentralized dealer network in which each independent dealer is given the flexibility to share his inventory we model inventory sharing as a multiple demand classes problem in which each dealer faces his own customer demand with high priority and inventory sharing requests from other dealers with low priority assuming that each dealer uses a base stock and threshold rationing policy for his inventory stocking and inventory sharing decisions we explicitly model the interactions between the dealers through inventory sharing and obtain aclosed form cost function for each dealer based on the steady state distribution of the inventory levels at the two dealers we then provide a detailed supermodularity analysis of the inventory sharing and inventory rationing game in which each dealer has a two dimensional strategy set stocking level and rationing level we show that the full sharing game in which dealers precommit to sharing all of their on hand inventory and the fixed sharing level game in which dealers precommit to sharing a portion of their on hand inventory are supermodular and thus a pure strategy nash equilibrium is guaranteed to exist for the rationing game in which dealers precommit to their stocking levels we show that there exists a dominant strategy equilibrium on the dealers sharing rationing levels finally a comprehensive computational study is conducted to highlight the impact of the manufacturer s incentives subsidies and or transshipment fees on the dealers sharing behavior

productivity spillovers in team production evidence from professional basketball we estimate a model where workers are heterogeneous both in their own productivity and in their ability to facilitate the productivity of others we use data from professional basketball to measure the importance of peers in productivity because we have clear measures of output and members of a worker s group change on a regular basis our empirical results highlight that productivity spillovers play an important role in team production despite this we find that worker compensation is largely determined by own productivity with little weight given to productivity spillovers

using imperfect advance demand information in ordering and rationing decisions in this paper we consider an inventory problem with two demand classes having different priorities the appropriate policy of rationing the available stock i e reserving some stock for meeting prospective future demand of preferred customers at the expense of deliberately losing some of the currently materialized demand of lower demand class es relies on the estimation of the future demand utilizing current signals on future demand which we refer to as imperfect advance demand information adi decreases uncertainty on future demand and may help to make better decisions on when to start rejecting lower class demand we develop a model that incorporates imperfect adi with inventory ordering replenishment decision and rationing available stock in a two period setting we show some structural properties solve the rationing problem and propose solution methods based on monte carlo simulation for the ordering problem we conduct numerical tests to measure the impact of system parameters on the expected value of imperfect adi and provide useful managerial insights

dynamic inventory rationing with mixed backorders and lost sales abstract customers may react differently when stockouts occur in this paper we investigate the rationing policy for an inventory system with a mixture of demand classes of backorder type and lost sales type since the penalty cost of backorders varies with time the priorities of demand classes also alter with time this totally changes the problem structure compared with the classic rationing models a dynamic rationing policy is studied in this paper by considering the dynamics of demand priorities a markov decision model is developed to obtain the optimal dynamic rationing levels for multiple demand classes the results indicate that between the priority switching points rationing levels often exhibit different patterns for lost sales demand classes the rationing levels always decrease as the remaining time approaches to zero for backorder demand classes the rationing levels increase in some parts due to declining of the priorities the rationing levels of all demand classes finally decline to zero to reduce the inventory holding cost the application of dynamic rationing is further extended from a single period model to a multi period s t model where unit cost has to be included the optimal ordering policy is proved to be a myopic base stock policy and the dynamic rationing policy in the single period model can still be applied with modified time independent penalty costs for lost sales classes to overcome the computational complexity a heuristic dynamic rationing policy is introduced due to its good outcome implementing such a heuristic dynamic rationing policy can be a practical solution for inventory system with mixed backorders and lost sales in order to enhance the system performance

dynamic inventory rationing strategies for inventory systems with two demand classes poisson demand and backordering we study inventory systems with two demand classes critical and non critical poisson demand and backordering we analyze dynamic rationing strategies where the number of items reserved for critical demand depends on the remaining time until the next order arrives different from results in the literature we do not discretize demand but derive a set of formulae that determine the optimal rationing level for any possible value of the remaining time moreover we show that the cost parameters can be captured in a single relevant dimension which allows us to present the optimal rationing levels in charts and lookup tables that are easy to implement numerical examples illustrate that the optimal dynamic rationing strategy outperforms all static strategies with fixed rationing levels

the stochastic knapsack revisited switch over policies and dynamic pricing the stochastic knapsack has been used as a model in wide ranging applications from dynamic resource allocation to admission control in telecommunication in recent years a variation of the model has become a basic tool in studying problems that arise in revenue management and dynamic flexible pricing and it is in this context that our study is undertaken based on a dynamic programming formulation and associated properties of the value function we study in this paper a class of control that we call switch over policies start by accepting only orders of the highest price and switch to including lower prices as time goes by with the switch over times optimally decided via convex programming we establish the asymptotic optimality of the switch over policy and develop pricing models based on this policy to optimize the price reductions over the decision horizon

influence of dependency between demands and returns in a reverse logistics system we consider two reverse logistics systems where returned products are as good as new for the first system the product return flow is independent of the demand flow we prove that the optimal policy is of base stock type and we establish monotonicity results for the optimal base stock levels with respect to the system parameters arrival rate production rate return rate production cost lost sale cost return cost and holding cost we also provide an efficient algorithm to compute the optimal base stock level for the second system demands and returns are strongly correlated a satisfied demand induces a product return after a stochastic return lead time with a certain probability when the return lead time is null we extend the results obtained for the first system when the return lead time is positive the optimal control problem is more complex and we do not prove that the optimal policy is of base stock type however we provide a framework to analyse base stock policies finally we carry out a numerical study on many scenarios to investigate the impact of ignoring dependency between demands and returns we observe that ignoring this dependency yields to non negligible cost increase