analzying trade offs between machine investment and utilization analyzing machine investment opportunities from a systems perspective requires an understanding of interdependencies between machine investment and utilization decisions machine investment decisions involve determining the number of machines to purchase and their types machine utilization decisions involve determining part allocations and production cycles interdependencies between these decisions result in trade offs between investment and operating costs this paper develops an analytical approach for studying machine investment opportunities in a broad systems context it begins with a discussion of the interdependencies between investment and utilization decisions the focus of this research and a review of existing literature related to machine investment decisions are then discussed next a mathematical model that quantifies these interdependencies is formulated the paper ends with a simple example that demonstrates the usefulness of the model and highlights the importance of using a systems app

dynamic setup reduction in production lot sizing with nonconstant deterministic demand abstract we examine three production policies under nonconstant deterministic demand and dynamic setup cost reduction where a decision to invest in setup reduction is made at the beginning of each period of a planning horizon the three production policies are the reorder point order quantity s q policy the fixed production cycle variable order quantity t q i policy and the variable production cycle variable order quantity t i q i we study the behavior of the total relevant cost and develop a lot sizing and an investment solution procedure numerical examples are provided and dynamic setup cost reduction is compared with static setup cost reduction where the decision to invest in setup reduction is made only at the initial setup

optimal joint pricing and lot sizing with fixed and variable capacity this paper examines previously unexplored fixed and variable capacity problems of jointly determining an item s price and lot size for a profit maximizing firm facing constant but price dependent demands over a planning horizon we apply geometric programming to these constrained nonlinear maximization problems with nonconcave objective functions and obtain global optimal solutions using kuhn tucker condition marginal and sensitivity analyses we investigate model interactions provide managerial implications on the optimal capacity decisions and explore the postoptimal behavior of the price lot size and capacity expansion and reduction size some findings cast interesting insights different from previous just in time management studies without pricing consideration

inventory policy with time dependent setup cost abstract assume a time interval t is given moreover assume that the setup cost is not constant but varies with the lapse of time our problem is to determine the inventory policy for the given t how often the order is placed during t and how much is ordered at each ordering time point are our main themes we solve these problems in the following ways if frequency of orders for t is given arbitrarily the ordering policy is to be planned by using the techniques of dp by choosing a proper frequency of orders so that it may minimize the total inventory cost required during t an optimal inventory policy for t is determined moreover by applying dp some mathematical properties of this policy are examined even if exact mathematical expressions for frequency of orders and inventory cost are determined their values are obtained these become the merit of applying dp

on the single resource capacity problem for multi item inventory systems in this paper we study multi item inventory systems under a single resource capacity constraint in contrast to most previous approaches we treat the capacity as a decision variable and not as given data this is consistent with many practical cases where additional capacities resources can be acquired rented at some cost profit two solution procedures are developed for deriving an optimal policy within the class of policies that has a fixed cycle for all items with phasing of orders within the cycle these solution procedures can be applied to various types of cost functions as illustrated by an example

the impact of multiple stocking points on system profitability in this paper we examine the impact of multiple stocking points on system profitability by examining the increased profit needed to offset cost increases due to cycle inventory safety stock and order placement we utilize the economic order quantity model to analytically evaluate this relationship a table based on the analytical result is presented at the end of the paper that quickly illustrates this relationship

optimal investment in setup reduction in manufacturing systems with wip inventories abstract a number of models have been proposed to predict optimal setup times or optimal investment in setup reduction in manufacturing cells these have been based on the economic order quantity eoq or economic production quantity epq model formulation and have a common limitation in that they neglect work in process wip inventories which can be substantial in manufacturing systems in this paper a new model is developed that predicts optimal production batch sizes and investments in setup reduction this model is based on queuing theory which permits it to estimate wip levels as a function of the decisions variables batch size and setup time optimal values for batch size and setup time are found analytically even though the total cost model was shown to be strictly non convex

the economic lot size and relevant costs abstract in many accounting textbooks it is strongly argued that decisions should always be evaluated on relevant costs that is variable costs and opportunity costs surprisingly when it comes to economic order quantities or lot sizes some textbooks appear to be less straightforward the question whether described eoq models are in fact based upon variable costs and opportunity costs is generally not explicitly dealt with this paper will investigate relevant costs if lot sizes in a components manufacturing plant are changed the nature of opportunity costs is examined and several kinds of semi variable costs regarding the use of infrastructural capacity and material flow are discussed in this manner it is shown that in eoq models sunk costs are always included it also occurs that variable costs must be analyzed carefully this is also the case for more advanced models as described by for instance wagner and within or bertrand opportunity costs are in fact neglected which nevertheless is not always that dramatic as some authors suggest

inflation interest rate policy and currency substitutions in developing economies a discussion of some major issues abstract this paper deals with the management of interest rates in an open economy under rapid inflation and reviews the links between interest and exchange rate policies to prevent current substitution the rate of interest paid to lenders must equal the equivalent rate after adjusting for differential taxation and intermediation costs this would probably induce capital inflows and consequent monetary growth exchange risks are also considered in this context the paper concludes that under inflationary conditions it is difficult to use only interest rates to achieve both proper resource allocation and prevention of currency substitution some policy measures to cope with this problem are discussed

the trade balance and real exchange rate under currency substitution abstract it is demonstrated that the calvo and rodriguez 1977 results hold up in a utility maximizing model contrary to the claim of liviatan 1981 it is argued that liviatan s conclusions are based on a mistaken assumption having rescued calvo rodriguez from liviatan it is then shown that the calvo rodriguez results are dependent on two special assumptions that there is only one foreign asset traded and its real return is zero the paper also shows that there is an avenue for foreign inflation transmission under perfectly floating exchange rates even when goods prices are perfectly flexible however the direction of response of real variables is in general ambiguous

leadtime reduction in a q r inventory system an agency perspective abstract we examine the problem of designing and implementing a continuous review q r inventory system from an agency perspective in which the agent s effort influences the item s replenishment leadtime our results are as follows if the agent is risk neutral a linear or quadratic contract achieves first best for a risk averse agent with an exponential utility function assuming a normal leadtime distribution we determine the optimal linear contract extensive numerical experiments suggest that ignoring the possible influence of the agent on the replenishment leadtime can be costly but that the cost penalty of ignoring agency can be significantly reduced by a simple contract

investments in modern production technology and the cash flow oriented epq model in this study we analyze investments in setup and production processes in the context of the traditional inventory problem the comparison of the results of a cash flow and a cost oriented model suggests the use of the net present value as a decision criterion the analysis shows that an additional investment which reduces setup cost decreases the optimal capital investment necessary to reduce production cost and vice versa an investment which increases the production rate however may increase or decrease the capital expenditure of an investment in the setup process

supply chain coordination with downstream operating costs coordination and investment to improve downstream operating efficiency abstract we endow the downstream firm in a supply chain with operating costs in addition to the traditional overage and underage costs we reanalyze lariviere and porteus s selling to a newsvendor model 2001 allowing for non linear production costs and provide comparative statics we then explore investment in reducing downstream operating costs to overcome the fact that investment is lower in a decentralized chain than in an integrated one we propose several coordination mechanisms buybacks revenue sharing and operating subsidy with a license fee

inventory and investment in setup and quality operations under return on investment maximization in this paper we construct and analyze a return on investment roi maximization model for inventory and capital investment in setup and quality operations under an investment budget constraint specifically we show how such an roi maximization model can be formulated and derive analytical results such as the conditions under which the inventory is reduced and for the determination of the unique global optimal solution in addition by applying the reformulation linearization technique rlt we show via numerical examples how this nonconvex optimization model can be solved effectively and how rlt may produce superior results to those from the conventional cut across the board rule cabr various managerial insights are provided throughout the paper for example as the investment budget increases or decreases a fundamental shift of investment strategies setup cost reduction vs quality improvement may be necessary so as to maximize roi

a joint economic lot size model with financial collaboration and uncertain investment opportunity establishing long term relationships among the members of a supply chain has become necessary to enhance the supply chain s competitiveness in a globalized environment besides coordinating operational decisions such as how much and when to produce or to order the members of a supply chain may also share financial resources or act jointly on the capital market this is important especially when companies have unequal access to capital for example because they are located in countries with different economic conditions and banking policies and or they have different credit ratings the joint financing of investments across the supply chain may thus ensure the stability of production and of the flow of products to the customers in addition it strengthens the established relationships among the supply chain members the paper at hand takes up these issues and presents a joint economic lot size model that allows investments financed cooperatively by the members of the supply chain in particular it considers a two stage single vendor single buyer supply chain and assumes that the vendor has the option to invest in increasing its production rate the outcome of these attempts to improve production capabilities however is uncertain and subject to an investment success probability due to different access to capital the vendor and the buyer may also share the investment and the outcome uncertainty which can be beneficial to both parties

currency substitution and the real exchange rate the utility maximization approach abstract this paper studies the currency substitution hypothesis with rational expectations in terms of a sidrauski type model where domestic and foreign money enter the utility function it shows that contrary to liviatan 1981 the approach does not necessarily contradict calvo and rodriguez 1977 furthermore the impact of monetary stabilization policy is fully characterized with flexible and pre fixed rates for an extension of dornbusch and mussa 1975 a brief analysis of the optimal quantity of money is also provided

currency substitution inflation and welfare abstract currency substitution affects the mapping between social welfare and inflation by altering the underlying money demand function and influencing interest rates in order to explore the essence of this effect i build a model with working capital under which foreign currency is substituted with the less liquid components of domestic money the framework closely mimics the actual pattern of currency substitution across varying rates of inflation and enables the study of an additional channel that works through the impact of currency substitution on interest rates it is found that there is a threshold inflation rate which turns out to be 44 under baseline calibration below which currency substitution decreases welfare and vice versa a practical implication is that at inflation rates lower greater than the threshold the potential welfare gains from disinflation to a near zero inflation rate are higher lower if there is currency substitution than otherwise

an optimal investment and inventory policy the relation between the optimal production level and the optimal investment in a flexible manufacturing machine will be the subject of this paper the study concerns the production of n families of products on one production machine the investment level in a particular production machine is assumed to depend on both the intra and inter family set up times the optimal production level will be shown to depend on the optimal investment choice made and as such on both the intra and inter family set up times the results show the necessity of coordination between several departments as for instance the production planning department and financial department of an organization moreover it will be argued that circumstances exist in which mathematical models can be used in a more qualitative level of analysis

an integrated inventory model for a single vendor and multiple buyers with ordering cost reduction abstract forming strategic alliances and utilizing modern information technologies have been the two most important ways for firms to gain such competitive advantages as lower logistics costs and secure customers loyalty in this paper we consider an integrated inventory system where a single vendor purchases and processes raw materials in order to deliver finished items to multiple buyers the vendor and all buyers are willing to invest in reducing the ordering cost e g establishing an electronic data interchange based inventory control system in order to decrease their joint total cost the amount of investment determines the planned ordering cost and hence affects their replenishment decisions one major managerial implication from this ordering cost reduction is that the efforts to streamline and speedup transactions via the application of information technologies may result in a higher degree of coordination and automation among allied trading parties an analytical model is developed to derive the optimal investment amount and replenishment decisions for both vendor and buyers the exponential ordering cost function is then applied to our general model and a numerical analysis is performed to provide interesting insights of the model numerical results show that the vendor and all the buyers can benefit directly from substantial cost savings by this ordering cost reduction investment

an economic production quantity model with flexibility and reliability considerations abstract the classical economic production quantity epq model assumes that items are produced by a perfectly reliable production process with a fixed set up cost while the reliability of the production process cannot be perfect without a price its set up cost can be reduced with investment in flexibility improvement an epq model with a flexible and imperfect production process is proposed in this paper this inventory optimization problem is then formulated as a geometric program gp and solved to obtain closed form optimal solutions after the theoretical treatment a numerical example is provided to illustrate how the gp theories are applied to solve a given problem finally some aspects of post optimality sensitivity analysis based on the gp approach are discussed

epq models with varying setup cost abstract in this paper the classical economic production quantity epq model is generalized by considering a relationship between the setup cost and the production run length the dependency between the setup cost and run length can be related to process deterioration and learning and forgetting effects two models are developed the first of which is for the case when shortages are not allowed and the other one permits shortages the cost functions associated with these models are proved to be convex and optimal solutions are determined results show that the relationship between setup cost and production run length has a significant impact on the optimal lot size and average total cost in the epq model numerical examples are presented to demonstrate the utility of the models

invest or exit optimal decisions in the face of a declining profit stream even in the face of deteriorating and highly volatile demand firms often invest in rather than discard aging technologies to study this phenomenon we model the firm s profit stream as a brownian motion with negative drift at each point in time the firm can continue operations or it can stop and exit the project in addition there is a one time option to make an investment that boosts the project s profit rate using stochastic analysis we show that the optimal policy always exists and that it is characterized by three thresholds there are investment and exit thresholds before investment and there is a threshold for exit after investment we also effect a comparative statics analysis of the thresholds with respect to the drift and the volatility of the brownian motion when the profit boost upon investment is sufficiently large we find a novel result the investment threshold decreases in volatility

an optimal integrated vendor buyer inventory policy under conditions of order processing time reduction and permissible delay in payments abstract this study deals with the order processing cost reduction and permissible delay in payments problem in the single vendor single buyer integrated inventory model we consider that the order processing cost can be reduced at an extra crashing cost which varies with the reduction in the order processing time length in addition the buyer is allowed a fixed time period before they settle the account with the vendor the objective of this study is to minimize the annual integrated total cost by optimizing simultaneously the delivery interval the number of deliveries per order and the investment cost in order processing time an integrated total cost function is derived and an algorithm procedure is proposed for determining the optimal decision variables finally numerical examples are provided to illustrate the algorithm procedure

investment policy for multiple product setup reduction under budgetary and capacity constraints abstract this paper investigates the impact of setup cost and time reduction on production batch sizes and the schedule in a batch manufacturing system producing multiple products it is assumed that the system s operating environment is deterministic and there are budgetary and capacity constraints the schedule feasibility of the embedded economic lot scheduling problem is attained by using the common cycle approach the extent of setup reduction attained is treated as a function of capital investment in technology the problem of simultaneously determining the lot sizes as well as the investments made in setup reduction for the different products with the objective of minimizing the total relevant cost is formulated as a non linear constrained optimization model a solution algorithm using the generalized lagrangian approach is developed to solve this problem a heuristic approach is also suggested for cases where the optimization procedure becomes computationally cumbersome the concepts developed are illustrated through a numerical example

an analysis of declining incidence of regular labour contracts in rural india evidence obtained from the icrisat villages in india suggests that the decline of regular contracts has been accompanied by the growth in real wages and casualisation of the rural labour force in view of this evidence the article examines the causes of the declining incidence of regular contracts in rural india we argue that this has been caused by the leftward shift in the regular labour supply curve due to improved employment and credit opportunities and not an upward movement of the labour demand curve as manifested by the increase in real wages over the years

a century of evolution from harris s basic lot size model survey and research agenda abstract determining the economic lot size has always represented one of the most important issues in production planning this problem has long attracted the attention of researchers and several models have been developed to meet requirements at minimum cost in this paper we explore and discuss the evolution of these models during one hundred years of history starting from the basic model developed by harris in 1913 up to today following harris s work a number of researchers have devised extensions that incorporate additional considerations the evolution of eoq theory strongly reflects the development of industrial systems over the past century here we outline all the research areas faced in the past by conducting a holistic analysis of 219 selected journal papers and trying to give a comprehensive view of past work on the eoq problem finally a new research agenda is proposed and discussed

casual and regular contracts workers self selection in the rural labour markets in india the article examines workers choice between casual and regular contracts it departs from existing theories in that in addition to wage considerations it highlights the significance of time and credit constraints results obtained from the icrisat villages in india suggest that risk averse landless labourers ought to prefer casual to regular contracts because earnings from casual contracts are higher however this argument gets strongly modified once we consider that a large part of regular wages are received in advance and that the comparative attractiveness of regular contracts depends crucially on whether labourers have access to credit and other jobs

joint product durability and lot sizing models this paper concerns the simultaneous selection of product durability and order quantity for items that deteriorate over time choices of product durability are modelled as the values of a single design parameter that affects the distribution of the time to onset of deterioration tod once deterioration has begun individual items are assumed to have exponential remaining lifetimes we analyze two scenarios in the first case items are guaranteed to be good if used prior to an expiry date therefore tod is a constant and the store manager may choose an appropriate value at cost in the second case tod is a random variable then the design parameter can affect tod distribution in either mean preserving or variance preserving or mixed manner we report insightful numerical examples for each case and derive highly plausible conditions which when true imply that the corresponding expected cost per unit time is strictly quasi convex

chain to chain competition on product sustainability this paper studies the game model of two sustainable supply chains under competition in product sustainability derives the equilibrium structures of the two chain system and generates the managerial insights when the supplier and manufacturer within the reverse supply chain are competitive the sustainability degrees demands and profits under three structures of this two chain system are analyzed it is found that although vertical integration is always a nash equilibrium it is pareto optimal only when the competition degree is low on the other hand a more generalized case for the former model is investigated when the supplier and manufacturer are cooperative in bargaining the wholesale price and the effects of bargaining power to the sustainability degrees demands and chain member profits are studied it is further shown that the structure of vertical integration channels is not an equilibrium unless the two sustainable supply chains are independent

just in time component replenishment decisions for assemble to order manufacturing under capital constraint and stochastic demand abstract while just in time ideas have been enthusiastically embraced by manufacturing practitioners the small replenishment batch sizes advocated are difficult to reconcile with the standard management science cost trade off approach in a previous paper by the authors which analysed a multi product manufacturing scenario under deterministic demand this difficulty was diagnosed as being due to the standard assumption that capital for inventory is borrowed and hence boundless when inventory is financed by investors and is thus finite the investment level must be treated as an additional variable in the decision to adopt inventory reduction policies for lean investments which might be chosen to maximise return on investment roi rather than absolute profit or for reasons of flexibility jit replenishment becomes more attractive for certain components than the standard analysis would suggest because the capital formerly invested in these components can be reinvested in the inventory of the remaining batch components to improve efficiencies this paper treats the stochastic version of the same problem develops a tractable solution method for the decision problem and in addition to reinforcing the findings of the previous study reveals several other ways in which jit replenishment and component substitution can improve performance by limiting the cost of dealing with uncertainty the analysis is illustrated using an actual case study of a small manufacturing enterprise seeking to reduce inventory and increase roi

joint pricing and inventory policies for make to stock products with deterministic price sensitive demand abstract in this paper we focus on a firm selling a single make to stock product to price sensitive end customers we develop an integrated operations marketing model that can help determine the relevant profit maximizing decision variable values for two pricing policies that the firm might follow price as a decision variable which is advocated by academicians and mark up pricing used by most practitioners we first consider an eoq based model with price and order quantity as independent decision variables we then develop an analogous model where price is a mark up over operating costs per unit and order quantity becomes the sole decision variable we are able to ascertain the optimal decision variable values for each model for log linear and linear demand functions we prove that for such profit maximizing models the optimal batch size is not necessarily monotone increasing in set up cost interestingly our numerical analytical evidence suggests that from a profit perspective it is better for managers to be aggressive on price rather than reducing price too much especially for highly price sensitive and non linear demand moreover we establish that in general the profit penalty for not including inventory costs in determining the optimal batch size or ignoring the batch size optimization issue in a mark up price model is not significant only when the set up cost is quite high and or the firm faces non linear demand from highly price sensitive end consumers does it become crucial for managers to determine the exact optimal batch size and base the mark up price on the entire unit operating cost not only the unit variable production cost

lead time variability reduction in stochastic inventory models abstract this research is motivated by the realization that japanese manufacturers have devoted much time and effort to establish a long term partnership with their suppliers in order to reduce lead time uncertainty it is very common for a japanese manufacturer to advance money to finance its suppliers and help them meet the rigid delivery standards imposed however there have been very few mathematical analyses of the advantages of investing in such efforts the main objective of this paper is to provide an analytical model to quantify the tradeoffs associated with lower lead time uncertainty in particular we consider the option of investing in order to reduce the lead time variance in an inventory model with stochastic lead time the paper also considers the option of investing in both setup cost and lead time variability reduction numerical results are presented to demonstrate the use of the models sensitivity analysis is performed to indicate under what conditions investment is warranted

lead time reduction strategies in a single vendor single buyer integrated inventory model with lot size dependent lead times and stochastic demand this paper studies alternative methods for reducing lead time and their impact on the safety stock and the expected total costs of a q s continuous review inventory control system we focus on a single vendor single buyer integrated inventory model with stochastic demand and variable lot size dependent lead time and assume that lead time consists of production and setup and transportation time as a consequence lead time may be reduced by crashing setup and transportation time by increasing the production rate or by reducing the lot size we illustrate the benefits of reducing lead time in numerical examples and show that lead time reduction is especially beneficial in case of high demand uncertainty further our studies indicate that a mixture of setup time and production time reduction is appropriate to lower expected total costs

the effect of leadtime uncertainty in a simple stochastic inventory model we study a basic continuous time single item inventory model where demands form a compound poisson process and leadtimes are stochastic the performance measure of interest is the long run average cost order costs are linear so a base stock policy is optimal we focus on the behavior of the optimal base stock level in response to stochastically larger or more variable leadtimes we also investigate the behavior of the corresponding long run average costs we show that a stochastically larger leadtime requires a higher optimal base stock level however a stochastically larger leadtime may not necessarily result in a higher optimal average cost because sometimes the variability effects may dominate on the other hand a more variable leadtime always leads to a higher optimal average cost the effect of leadtime variability on optimal policies depends on the inventory cost structure a more variable leadtime requires a higher optimal base stock level if and only if the unit penalty holding cost rate is high low similar results regarding the effect of leadtime demand are also discussed in this latter case the compound poisson assumption is not necessary

investing in reduced setups in the eoq model this paper is motivated by the observation that the japanese have devoted much time and energy to decreasing setup costs in their manufacturing processes and that there has been little in the way of a formal framework available to use to think about such efforts the object of this paper is to begin to provide such a framework the framework developed identifies only one aspect of the advantages of reducing setups namely reduced inventory related operating costs the other advantages such as improved quality control flexibility and increased effective capacity are not accounted for in this paper nevertheless substantial reductions in setups may be warranted based solely on the benefits identified in this paper the approach taken here introduces an investment cost associated with changing the current setup level and adds a per unit time amortization of this cost to the other costs identified in the standard eoq model the general problem becomes that of minimizing the sum of a convex and a concave function in two special cases the minimization can be carried out explicitly in one of these cases numerous interpretations of the results are made including comparisons of japanese and american practices for example holding other parameters constant there is a critical sales level such that investment is made in reducing setups if and only if the sales rate is above that level when such investment is made the optimal lot size is independent of the sales rate the paper also addresses the joint selection of the setup cost and the sales rate selection of the sales rate is seen as incorporating explicit production and holding costs into the classical monopolist s pricing problem an explicit solution is obtained for the model postulated

an integrated vendor buyer inventory model with order processing cost reduction and permissible delay in payments trade credit plays an important role in financing for many businesses and industries for the buyers purchased inventory can be considered to be financed in whole or in part with permissible delay in payments during the purchasing process on the other hand both the vendor and buyer take part in order processing cost reduction by applying information technologies such as edi electronic data interchange the order processing cost can also be reduced by adding certain capital investments and this will affect the lot size decisions this article develops an integrated inventory model to determine the optimal inventory policy under conditions of order processing cost reduction and permissible delay in payments and shows that the total annual variable cost function possesses some kinds of convexities a solution procedure is provided to determine the optimal order policy finally a numerical example is presented to illustrate the solution procedure

the impact of dynamic pricing on the economic order decision this paper analyzes the impact of dynamic pricing on the single product economic order decision of a monopolist retailer items are procured from an external supplier according to the economic order quantity eoq model and are sold to customers on a single market without competition following the simple monopolist pricing problem coordinated decision making of optimal pricing and ordering is influenced by operating costs including ordering and inventory holding costs and the demand rate obtained from a price response function the retailer is allowed to vary the selling price either in a fixed number of discrete points in time or continuously while constant and continuous pricing have received much attention in the literature problems with a limited number of price changes are rather rare this paper illustrates the benefit of dynamically changing prices to achieve operational efficiency in the eoq model that is to trigger high demand rates when inventories are high we provide structural properties of the optimal time instants when the price should be changed taking into account costs for changes in price it provides numerical guidance on number timing and size of price changes during an order cycle numerical examples show that the benefits of dynamic pricing in an eoq framework can be achieved with only a few price changes and that products being unprofitable under static pricing may become profitable under dynamic pricing

currency substitution new evidence from emerging economies abstract this paper provides new empirical evidence for currency substitution in different emerging market economies estimation results from a money in the utility function framework indicate that foreign currencies are strong substitutes for domestic currency in producing liquidity services

product balancing under conditions of quality inflation cost pressures and growth strategies abstract this paper analyzes an organization that has a well defined strategy providing a sustainable competitive advantage this advantage is expressed by at least one dimension of quality on which the product or service exhibits outstanding performance using decreasing and increasing exponential demand functions for price and quality respectively the optimal quality level is characterized when dollar sales volume under a cost based price floor and profit are maximized however as quality inflates the same quality performance is worth less tomorrow than today this paper shows that continuous and simultaneous improvement of operational efficiency and quality is a must and is independent from price setting policies the condition of optimal trade offs among quality dimensions is found for the case when the company competes on multiple quality dimensions finally the conditions are analyzed when the resources of quality are utilized in other market segments as well it is found that the corporate level quality or the utilization level of resources is lower higher than the highest least individual business unit product quality