intertemporal cost dependence in the presence of managerial impatience abstract a multi period agency problem arising in the presence of intertemporal cost dependence is investigated the principal delegates production decisions to a manager who is impatient the manager has private information on the nature of cost dependence that takes the form of an experience effect since the impatient manager would not invest enough to gain experience the principal designs a second best scheme to motivate the manager to increase intertemporal profit for the firm the second best scheme is obtained as a direct revelation mechanism that specifies outputs prices as well as the manager s compensation a significant result is that unlike the first best case impatience is not necessarily a disadvantage with asymmetric information impatience can be exploited to reduce the manager s information rent resulting in preferred outcomes for the principal

a multiobjective approach to vendor selection abstract purchases from vendors involve significant costs for many firms decisions related to these purchases include the selection of vendors and the determination of order quantities to be placed with the selected vendors such decisions are frequently multiobjective in nature that is they are evaluated by more than one criterion at least 23 criteria for various vendor selection problems have been identified in this article we present a multiobjective approach to systematically analyze the inherent tradeoffs involved in multicriteria vendor selection problems the approach is motivated by and demonstrated with an actual purchasing problem facing a division of a fortune 500 company

a weighted additive fuzzy multiobjective model for the supplier selection problem under price breaks in a supply chain abstract supplier selection is one of the most critical activities of purchasing management in a supply chain because of the key role of supplier s performance on cost quality delivery and service in achieving the objectives of a supply chain supplier selection is a multiple criteria decision making mcdm problem that is affected by several conflicting factors depending on the purchasing situations criteria have varying importance and there is a need to weight criteria in practice for supplier selection problems most of the input information is not known precisely in these cases the theory of fuzzy sets is one of the best tools for handling uncertainty the fuzzy multiobjective model is formulated in such a way as to simultaneously consider the imprecision of information and determine the order quantities to each supplier based on price breaks the problem includes the three objective functions minimizing the net cost minimizing the net rejected items and minimizing the net late deliveries while satisfying capacity and demand requirement constraints in order to solve the problem a fuzzy weighted additive and mixed integer linear programming is developed the model aggregates weighted membership functions of objectives to construct the relevant decision functions in which objectives have different relative importance a numerical example is given to illustrate how the model is applied finally the conclusions and recommendations are presented

an improved model for supplier selection under capacity constraint and multiple criteria abstract ghodsypour and o brien 2001 the total cost of logistics in supplier selection under conditions of multiple sourcing multiple criteria and capacity constraint international journal of production economics 73 1 15 27 study multiple sourcing problem with multiple criteria and capacitated suppliers considering the buyer s quality requirements as a constraint they develop a mixed integer non linear programming model to find the least cost cyclic ordering policy for the buyer they propose to solve the model by enumerating over all possible supplier combinations although the problem is interesting and their analysis is correct we point out two issues with their assumptions namely capacitated suppliers and cyclic ordering policy we discuss two different capacitated supplier settings i long run average annual capacity and ii exact annual capacity first under long run average annual capacity assumption we propose a model which provides the same or a better solution and is much easier to solve than their model then we discuss how to modify our and their models to handle exact annual capacity assumption

purchasing raw materials with uncertain fluctuating prices on identifie les differentes etapes de la decision d achat des matieres premieres ainsi que les differentes approches et les aptitudes requises on decrit plusieurs methodes et modeles proposes et appliques aux differentes etapes les aspects importants etant l inadequation des modeles de stocks classiques l application de la programmation lineaire au probleme de melange la prevision des prix a l aide de l econometrie et de l analyse des series temporelles et la prise de decision sequentielle pour l achat au jour le jour

investment decisions and transferable discharge permits an empirical study of water quality management under policy uncertainty the problem of investiment decisions for sources participating in transferable discharge permit tdp markets has not received much attention one way tdps offer potential savings is with their ability to influence development in a region static models have assessed the potential savings of tdps but do not explicitly consider investment decisions thus they do not capture this long run role nor that of policy uncertainty and tend to understate both the cost saving potential and the difficulty in achieving it this paper addresses both problems by emphasizing the temporal dimension of tdps a two period investment model investigates the magnitude of these potential savings and the effects of two types of policy uncertainty upon expected gains from permit trading

environmental policy uncertainty and marketable permit systems the dutch phosphate quota program tradable permits are generally considered as an efficient instrument to regulate pollution by individual producers however uncertainty about changes in or possible discontinuation of the program could make individual farmers reluctant to invest in tradable permits this article uses the option approach to derive a theoretical model that shows the impact of policy uncertainty on investment in tradable quota the empirical assessment provides weak evidence for the existence of option values due to policy uncertainty for phosphate quota in swine production in the netherlands

a generalized quantity discount pricing model to increase supplier s profits in this paper the joint problem of ordering and offering price discount by a supplier to his sole major buyer is analyzed the objective is to induce the buyer to alter his order schedule and size so that the supplier can benefit from lower set up ordering and inventory holding costs we generalize the quantity discount pricing model of monahan monahan j p 1984 a quantity discount pricing model to increase vendor profits management sci 30 6 720 726 to 1 explicitly incorporate constraints imposed on the amount of discount that can be offered and 2 relax the implicit assumption of a lot for lot or order for order policy adopted by the supplier an algorithm is developed to solve the supplier s joint ordering and price discount problem

analysis and applications of replenishment problems under stepwise transportation costs and generalized wholesale prices abstract in this study we analyze the replenishment decision of a buyer with the objective of maximizing total expected profits the buyer faces stepwise freight costs in inbound transportation and a hybrid wholesale price schedule given by a combination of all units discounts with economies and diseconomies of scale this general cost structure enables the model and the proposed solution to be also used for the supplier selection of a buyer under the single sourcing assumption we show that the buyer s replenishment problem reduces to finding and comparing the solutions of the following two subproblems i a replenishment problem involving wholesale prices given by an all units discount schedule with economies of scale and a lower bound on the replenishment quantity and ii a replenishment problem involving wholesale prices given by an all units discount schedule with diseconomies of scale and an upper bound on the replenishment quantity we propose solution methods for these two subproblems each of which stands alone as practical problems and utilize these methods to optimally solve the buyer s replenishment problem

an evaluation of vendor selection models from a total cost of ownership perspective abstract many different vendor selection models have been published in the purchasing literature however there has been no systematic approach to compare the relative efficiency of the systems in this paper we propose to use the concept of total cost of ownership as a basis for comparing vendor selection models we illustrate the comparison with a real life data set of the purchasing problem of ball bearings at cockerill sambre a belgian multinational company in the steel industry from a total cost of ownership perspective mathematical programming models outperform rating models and multiple item models generate better results than single item models for this specific case study

a comparison of two marketable discharge permits systems abstract this paper is an extension of a krupnick w oates and e van de verg j environ econom management10 233 247 1983 their proposed permit system is shown to be formally equivalent to w d montgomery s j econom theory5 395 418 1972 pollution permit system under perfect competition however under noncompetitive assumptions the two systems function differently while montgomery s system may lead to large transaction costs polluters under krupnick et al s pollution offset system can be free riders benefiting from the transactions of others finally some empirical evidence suggests that the pollution offset system may be the most promising but only after several conditions are satisfied

just in time purchasing single or multiple sourcing abstract we consider two just in time jit purchasing models one utilizing a few sources and the other using the more conventional single source we address the issue of splitting a large order quantity into multiple deliveries taking account of the increase in the aggregate ordering transportation and inspection costs for multiple sourcing we formulate and solve a mathematical programming problem to obtain the optimal selection of suppliers and the size of the split orders for single sourcing we provide a procedure that yields the optimal number of deliveries

equilibrium evolution and learning abstract in their evolutionary theory of economic change nelson and winter 1982 developed a model based on winter 1971 in which agents have limited information processing capacities nelson s and winter s belief that the model would always generate a static selection equilibrium is shown to be incorrect despite that error simulation experiments based on their model yield a number of interesting implications about the effects of learning on evolutionary mechanisms when decision makers learn simulated competitive industries are much less volatile than when they do not moreover the most orthodox results are found when entry is difficult and there are large fixed costs of production perfect contestability implies extreme volatility

economic implications of emissions trading rules for local and regional pollutants in 1975 the united states environmental protection agency initiated an historic process of regulatory reform now known as the emissions trading program for nonuniformly mixed pollutants such as sulfur dioxides air quality is a function not only of the level of emissions but their location and stack heights as well the focus of this paper is how to protect local air quality and limit long range pollutant deposition caused by emission trades while allowing as much cost reducing trading activity as possible the authors examine the implications of two trading rules in two different airsheds using programming simulation models they find that the use of either trading rule represents a substantial improvement over relying exclusively on the current allocation of control responsibility

note an acquisition policy for a single item multi supplier system in this paper we consider the problem of developing an acquisition policy specifically given a set of potential qualified suppliers from whom should the firm buy the product in what quantities and how often we provide properties of the optimal solution and relate them to the approach of using a single source as advocated by jit the solution procedure provides the periodic order quantity from each supplier the order size and the firm cycle time as well as how many times per cycle we should order from each supplier we show that the maximum error of our solution can be made as small as desired

economic prescriptions for environmental problems how the patient followed the doctor s orders o ne of the dangers with ivory tower theorizing is that it is easy to lose sight of the actual set of problems which need to be solved and the range of potential solutions as one who frequently engages in this exercise i can attest to this fact in my view this loss of sight has become increasingly evident in the theoretical structure underlying environmental economics which often emphasizes elegance at the expense of realism in this paper i will argue that both normative and positive theorizing could greatly benefit from a careful examination of the results of recent innovative approaches to environmental management the particular set of policies examined here involves two tools which have received widespread support from the economics community marketable permits and emission charges pigou 1932 dales 1968 kneese and schultze 1975 both tools represent ways to induce businesses to search for lower cost methods of achieving environmental standards they stand in stark contrast to the predominant command and control approach in which a regulator specifies the technology a firm must use to comply with regulations under highly restrictive conditions it can be shown that both of the economic approaches share the desirable feature that any gains in environmental quality will be obtained at the lowest possible cost baumol and oates 1975 until the 1960s these tools only existed on blackboards and in academic journals as products of the fertile imaginations of academics however some countries have recently begun to explore using these tools as part of a broader strategy for managing environmental problems

the net benefits of incentive based regulation a case study of environmental standard setting economists interested in environmental safety and health regulation have long argued that decentralized incentive based or ib policies are more efficient than centralized command and control or cac approaches see charles schultze 1977 for instance these arguments generally have been based on the assumption that ib policies will accomplish the same goals as their cac counterparts but at less cost to society however some of those touting ib policies have overlooked an important point environmental workplace or even productsafety standards typically take the form of maximum permissible concentrations of harmful substances so that compliance only requires that all monitoring points or samples register readings below these critical levels for this reason ib policies typically assign a shadow price of zero to improvements that exceed the standard s while more crude cac policies generally result in overcontrol beyond the standards if there is no value to this overcontrol cac policies will not improve at all on ib approaches and will indeed be more expensive if however reduced concentrations below the level of the standards bring with them further improvements in health or the environment cac approaches will produce greater benefits than ib approaches thus a fair comparison between the two necessitates that any additional benefits associated with cac policies be offset against the cost advantages enjoyed by their ib counterparts although this possibility has been recognized by others scott atkinson and t h tietenberg 1982 for instance it is little appreciated and its empirical significance has never been ascertained that is our purpose here we do so by developing data on the costs and benefits of controlling a common air pollutant total suspended particulates or tsp in baltimore by comparing the tsp levels likely under both ib and cac approaches we are able to estimate the marginal costs and benefits associated with a variety of alternative air quality standards which take the form of maximum permissible concentrations this in turn allows us to determine the net benefits arising from the two kinds of regimes in the next section we present a simple conceptual framework for our analysis section ii describes the estimation of the costs and benefits of our hypothesized air pollution controls in baltimore section iii presents our somewhat surprising findings and section iv discusses those findings and their potential significance for regulation in the real world

the total cost of logistics in supplier selection under conditions of multiple sourcing multiple criteria and capacity constraint abstract little attention is given in the literature to decisions on the appropriate selection of suppliers and on assigning order quantities to these suppliers in the case of multiple sourcing with multiple criteria and with suppliers capacity constraints only a few mathematical programming models to analyse such decisions have been published to date and these have tended to consider only net price as the cost of purchasing although the costs of transportation ordering and storage may be significantly important to the decision in this paper a mixed integer non linear programming model is presented to solve the multiple sourcing problem which takes into account the total cost of logistics including net price storage transportation and ordering costs buyer limitations on budget quality service etc can also be considered in the model an algorithm is proposed to solve the model and the model is illustrated using a numerical example

procurement planning to maintain both short term adaptiveness and long term perspective we study the fuel procurement problem for electrical utilities under uncertain demand and market price long term contractual supply commitments are made at a set price with fuel suppliers at the beginning of each year each month the procurement planner can use fuel from these contracts or purchase fuel at the current market price motivated by practical insights from this market we propose a two phase dynamic procedure to determine a procurement plan in the first phase the minimum contract purchases for each month are determined at the beginning of the year in the second phase given the minimum contract purchases the more detailed procurement decisions are determined at the beginning of each month with the most up to date information we perform intensive computational experiments that show that this procedure produces high quality solutions comparable to a rolling horizon stochastic programming heuristic is easier to maintain and generalize is computationally faster and is robust to random fluctuations in demand requirements spot market prices and other sources of uncertainty

vendor selection with price breaks abstract we study the problem of vendor selection where a buyer must choose order quantities to place with vendors in a multiple sourcing network the selection process is influenced by the price delivery and quality objectives of the buyer as well as by the production or rationing constraints of the vendors vendors are assumed to offer price breaks which depend on the sizes of the order quantities each proce break schedule is characterized by two attributes it represents either quantity discounts or surcharges and is either cumulative all units or noncumulative incremental we present linear and mixed binary integer programming models that provide unifying frameworks for models of vendor performance measures from the purchasing literature and models of price breaks from the operations research literature we argue that our models offer viable approaches to vendor selection with price breaks because of the availability of commercial software packages for personal computers that provide flexible and efficient computational tools for solving the models this implies that vendor selection with price breaks can be performed at the fingertips of purchasing managers

tariff concessions in production sourcing in this paper we study a multi stage production sourcing problem where tariff concessions can be exploited at the firm level using free trade agreements between countries to solve the problem an algorithm which embeds a very large scale neighborhood vsln search into a simulated annealing framework is developed a numerical study is conducted to verify the effectiveness of the solution approach

the empirical properties of two classes of designs for transferable discharge permit markets abstract previous work by atkinson and lewis j environ econ manag 1 237 250 1974 and anderson et al an analysis of alternative policies for attaining and maintaining a short term no2 standard mathtech inc princeton n j 1979 has indicated the tremendous cost advantages to be achieved by moving from a policy based on emission standards to one based on marketable emission permits as tietenberg land econ 56 391 416 1980 points out however neither of the major permit designs treated in the literature are optimal from all points of view this has triggered a search for alternative permit designs which while they may not minimize compliance costs have sufficient other virtues as to make them attractive on other grounds the purpose of this paper is to examine within the context of an empirical mathematical programming model the air quality emission and cost consequences of two classes of the permit designs which can be implemented in the absence of information on control costs this case study involves particulate control in st louis

improving the efficiency of the purchasing process using total cost of ownership information the case of heating electrodes at cockerill sambre s a improving the efficiency of the purchasing process provides important opportunities to increase a firm s profitability in this paper we introduce a mathematical programming model that uses total cost of ownership information to simultaneously select suppliers and determine order quantities over a multi period time horizon the total cost of ownership quantifies all costs associated with the purchasing process and is based on the activities and cost drivers determined by an activity based costing system our approach is motivated by the purchasing problem of heating electrodes at cockerill sambre a belgian multinational steel producer in this case quality issues account for more than 70 of the total cost of ownership making the quality of a supplier a critical success factor in the supplier selection process

market power and transferable property rights the appeal of using markets as a means of allocating scarce resources stems in large part from the assumption that a market will approximate the competitive ideal when competition is not a foregone conclusion the question naturally arises as to how a firm might manipulate the market to its own advantage this paper analyzes the issue of market power in the context of markets for transferable property rights first a model is developed that explains how a single firm with market power might exercise its influence this is followed by an examination of the model in the context of a particular policy problem the control of particulate sulfates in the los angeles region

modelling a multi objective allocation problem in a government sponsored entrepreneur development programme abstract typically the vendor allocation problem for a commercial company requires the buyer to allocate business between the selected vendor suppliers to meet its needs at minimum cost taking account of its quality and delivery performance requirements however in a government sponsored entrepreneur development programme the allocation of business cannot only be made dependent on criteria that reflect the current ability of the vendor nor solely on criteria fulfilling the current needs of the buyer it must also consider how it may aid the vendors to improve their business performance in the future and also on how it affects the development of that indigenous industry sector furthermore conditions change from one year to the next so the problem is dynamic over time this paper describes how a combination of goal programming model gp with pre emptive priority ranking of goal constraints with a linear programming model facilitates allocation of businesses to entrepreneurs in particular the subject used in this paper is a malaysia government sponsored entrepreneur development programme for furniture maker which administered by a commercial company an innovative aspect of the work is the use of gp as a modelling rather than a solution technique it is used to convert the conflicting multi objectives that were expressed only in general policy terms to operational terms on which business could be allocated the paper shows how it can be used to try to understand and then formally model how managers use their judgement and experience in a complex multi criteria situation the paper goes on to show that using the formal model leads to more consistency in decision making and an improvement in the achievement of the objectives this is important as several different managers are having to make independent decisions on subsets of the vendors

an inventory model where customer demand is dependent on a stochastic price process abstract we investigate the optimal inventory operations of a firm selling an item whose price is driven by an exogenous stochastic price process which consequently impacts customer arrivals between ordering cycles this case is typical for retailers that operate in different currencies or trade products consisting of commodities or components whose prices are subject to market fluctuations we assume that there is a stochastic input price process for the inventory item which determines purchase and selling prices according to a general selling price function customers arrive according to a doubly stochastic poisson process that is modulated by stochastic input prices we analyze optimal ordering decisions for both backorder and lost sale cases we show that under certain conditions a price dependent base stock policy is optimal our analysis is then extended to a price modulated compound poisson demand case and the case with fixed ordering cost where a price dependent s s policy is optimal we present a numerical study on the sensitivity of optimal profit to various parameters of the operational setting and stochastic price process such as price volatility customer sensitivity to price changes etc we then make a comparison with a corresponding discrete time benchmark model that ignores within period price fluctuations and present the optimality gap when using the benchmark model as an approximation

finite mixture estimation of multiproduct cost functions this paper presents a technique of cost function estimation based on the theory of finite mixture distributions which allows for the simultaneous existence of multiple technologies of production when the researcher does not know which observations correspond to which technologies the finite mixture technique provides estimates of the proportions of firms using the various technologies facilitates comparisons between technologies and preserves the traditional interpretations of cost estimation after describing the mixture procedure the technique is illustrated on a large sample of savings and loan associations and it is concluded that this industry exhibits multiple technologies of production copyright 1991 by mit press

a multicriteria model for assigning new orders to service suppliers abstract this paper describes a multicriteria model developed to support decisions on the assignment of new orders to service suppliers in this case contractors for the construction or renewal of pipeline networks for gas distribution the model comprises two phases i computation of a quota expressed as a percentage of total work orders budget for each supplier ii assignment of each particular order to a supplier selected on the basis of a multi attribute preference index evaluated for each candidate contractor the first phase is executed at the beginning of each year and then reviewed quarterly and the quotas are defined by a two criteria model the prices quoted by the supplier for standard works and the past performance of the constructor given by a performance appraisal system the paper describes the structuring phase of the model as well as the descriptors and corresponding partial value functions used in each stage to perform the evaluation within an additive aggregation framework

compact bidding languages and supplier selection for markets with economies of scale and scope preference elicitation is a fundamental problem in single unit combinatorial auctions but it becomes prohibitive even for small instances of multi unit combinatorial auctions the bidders cannot express their preferences exactly as this would take a huge number of bids typically leading to inefficient allocations hence markets with economies of scale and scope require more compact and yet expressive bidding languages in this thesis we propose an expressive bidding language allowing bidders to describe the characteristics of their cost functions bidders in these auctions can specify various discounts and markups and specify pricing rules as logical functions finding the optimal allocation given these pricing rules is a strongly np hard optimization problem and we propose a mixed integer program to solve it based on field data we introduce a multi item cost function and provide extensive computational experiments to explore the computational burden and the impact of different language features on the computational effort and total spend of the auctioneer in addition we explore characteristics of the knowledge representation of the bidding language

auctions for split award contracts the buyer of a homogeneous input divides his input requirements into two contracts that are awarded to different suppliers he uses a sequential second price auction to award a primary and a secondary contract with a fixed number of suppliers the buyer pays a higher expected price than with a sole source auction the premium paid to the winner of the secondary contract must also be paid to the winner of the primary contract as an opportunity cost when entry is endogenous we identify the conditions under which a secondary contract can increase the number of suppliers and lower the expected price

a procurement decision support system in business volume discount environments emergence of a new discount pricing schedule called business volume discount becomes a major obstacle for procurement managers in finding the best purchasing strategy in the context of business volume discount a supplier offers discounts on total dollar amount of sales volume not on the quantity or variety of the products purchased from the supplier this paper describes a procurement decision support system pdss that has been successfully implemented to improve the purchasing activities of regional bell telephone companies in most purchasing operations a flexible procurement plan is considered a necessity because of the uncertainties associated with product demand and procurement budget pdss provides this flexibility by combining two different purchasing strategies purchasing on an annual commitment basis and on an as ordered basis although the development of the system is motivated by a particular application procurement of transmission plug in in one of the regional telephone companies the system is being used for a variety of procurement decisions involving business volume discount in the telecommunications industry the results of the implementation indicate that cost savings of up to 15 are achieved pdss use is not limited to the companies in the telecommunications industry the pdss model is applicable to any organization having a centralized procurement operation with business volume discount

dynamic lot sizing problem with continuous time markovian production cost this paper develops a polynomial algorithm for obtaining dynamic economic lot sizes in a single product multiperiod production system with the objective of minimizing total production and inventory costs over t periods it is assumed that production costs are linear inventory costs are concave setup costs are zero and backlogging is not permitted in all periods moreover the unit production cost is a stochastic variable which is evolved according to a continuous time markov process over the planning horizon the model is formulated as a stochastic dynamic programming dp optimization with the state variable being unit production cost then it is solved using the backward dynamic programming approach to justify the application of the proposed model two practical cases are presented

the dynamics of international differentiation a multi country evolutionary model the paper presents some admittedly preliminary results on evolutionary modeling of open economies interactions the dynamics is microfounded in a multiplicity of boundedly rational agents who imperfectly learn how to innovate in environments characterized by notionally unlimited opportunities micro discoveries is shown can generate persistent system level effects despite the absence in the model of any institutional specificity of individual countries processes of innovative exploration and imitation yield international divergence less often convergence catching up and falling bebind

a weighted max min model for fuzzy multi objective supplier selection in a supply chain abstract supplier selection is one of the most important activities of purchasing departments this importance is increased even more by new strategies in a supply chain supplier selection is a multi criteria decision making problem in which criteria have different relative importance in practice for supplier selection problems many input information are not known precisely the fuzzy set theories can be employed due to the presence of vagueness and imprecision of information a weighted max min fuzzy model is developed to handle effectively the vagueness of input data and different weights of criteria in this problem due to this model the achievement level of objective functions matches the relative importance of the objective functions in this paper an analytic hierarchy process ahp is used to determine the weights of criteria the proposed model can help the decision maker dm to find out the appropriate order to each supplier and allows the purchasing manager s to manage supply chain performance on cost quality and service the model is explained by an illustrative example

a smart market for industrial procurement with capacity constraints we address the problem of designing multi item procurement auctions for a monopsonistic buyer in capacity constrained environments using insights from classical auction theory we construct an optimization based auction mechanism smart market relying on the dynamic resolution of a linear program minimizing the buyer s cost under the suppliers capacity constraints suppliers can modify their offers in response to the optimal allocation corresponding to each set of bids giving rise to a dynamic competitive bidding process to assist suppliers we also develop a bidding suggestion device based on a myopic best response mbr calculation that solves an associated optimization problem assuming linear costs for the suppliers we study within a game theoretic framework the sequence of bids arising in this smart market under a weak behavioral assumption and some symmetry requirements an explicit upper bound for the winning bids is established we then formulate a complete behavioral model and solution methodology based on the mbr rationale and show that the bounds derived earlier continue to hold we analytically derive some structural and convergence properties of the mbr dynamics in the simplest nontrivial market environment which suggests further possible design improvements and investigate bidding dynamics and incentive compatibility issues via numerical simulations