bluuebunny/crossref_metadata_2025 huggingface dataset:
Solving Airline Crew Scheduling Problems by Branch-and-Cut
Authors: Hoffman Karla L. , Padberg Manfred
Published: November 2008

The crew scheduling problem is one that has been studied almost continually for the past 40 years but all prior approaches have always approximated the problem of finding an optimal schedule for even the smallest of an airline's fleets. The problem is especially important today since costs for flying personnel of major U.S. carriers have grown and now often exceed $1.3 billion a year and are the second largest item (next to fuel cost) of the total operating cost of major U.S. carriers. Thus even small percentage savings amount to substantial dollar amounts. We present a branch-and-cut approach to solving to proven optimality large set partitioning problems arising within the airline industry. We first provide some background related to this important application and then describe the approach for solving representative problems in this problem class. The branch-and-cut solver generates cutting planes based on the underlying structure of the polytope defined by the convex hull of the feasible integer points and incorporates these cuts into a tree-search algorithm that uses automatic reformulation procedures, heuristics and linear programming technology to assist in the solution. Numerical experiments are reported for a sample of 68 large-scale real-world crew scheduling problems. These problems include both pure set partitioning problems and set partitioning problems with side constraints. These “base constraints” represent contractual labor requirements and have heretofore not been represented explicitly in the construction of crew schedules thus making it impossible to provide any measure of how far the obtained solution was from optimality. An interesting result of obtaining less costly schedules is that the crews themselves are happier with the schedules because they spend more of their duty time flying than waiting on the ground.
Compound Sets in Mathematical Programming Modeling Languages
Authors: Bisschop J. J. , Kuip C. A. C.
Published: November 2008

This paper presents a series of simple but realistic examples in which common algebraic indexing conventions are not so convenient. In particular, it analyzes the difficulties caused by the conventions that each model component must have a fixed number of indices and that the order of the indices is significant to their meaning. To deal with these difficulties compensating extensions to algebraic notation are proposed. The proposed notation is compared to existing notation in terms of the human abilities to understand, maintain and verify model descriptions.
Were the Returns from Stocks and Bonds of Different Countries Really Different in the 1980s?
Authors: Turner Andrew L. , Hensel Chris R.
Published: November 2008

We analyzed the total equity returns of indexes from Australia, Canada, Germany, Japan, the UK, and the US and total fixed income returns of indexes from all but Australia (excluded due to lack of data) to see if the returns of stocks and bonds were statistically different across markets during the 1980s. At the end of 1989, these countries represented over 87% of the market capitalization of the Morgan Stanley Capital International (MSCI) World Equity Index and over 88% of the Salomon Brothers World Bond Index. This study used monthly observations from January 1980 through December 1989 and examined returns based in local currency and hedged and unhedged US dollars.

We found that sample mean stock and bond returns during the 1980s were statistically indistinguishable across countries. However, because the sample variances were so large relative to the sample means, it would have been difficult to detect differences in population means by any test. We found evidence of variance heterogeneity, which may be explainable by other economic factors. We also found that intercountry stock and bond correlations were not significantly different. Thus, we confirmed the results of other researchers, such as Jobson and Korkie (1981), but in a broader global context using more asset types and different statistical tests. Our work suggests reducing the number of input estimates to a MV global asset allocation problem. For practitioners trying to put MV analysis to use, these findings could have a significant effect on the practice of asset allocation.
An Algebraic Approach to Formulating and Solving Large Models for Sequential Decisions Under Uncertainty
Authors: Kirkwood Craig W.
Published: November 2008

This article presents an algebraic approach to formulating and solving large models for sequential decisions under uncertainty. With this approach, decision analysis optimization methods can be applied to complex decision problems which are generally analyzed in management science practice using heuristics. Using the approach, a decision problem is formulated in terms of decision variables, random variables, and functions relating these variables. This leads to a compact representation, and a simple algorithm can be used to quickly solve algebraic models that would have decision trees with several hundred thousand endpoints. An application to research and development planning illustrates the usefulness of such large sequential decision models.
Weighted Batch Means for Confidence Intervals in Steady-State Simulations
Authors: Bischak Diane P. , Kelton W. David , Pollock Stephen M.
Published: November 2008

We propose a new procedure for providing confidence-interval estimators of the mean of a covariance-stationary process. The procedure, a modification of the method of batch means, is an improvement over existing methods when the process displays strong correlation and a comparatively small number of observations is available.

We assign weights to the observations within a batch. The weights are determined by the order of the time-series model fit to the process and by its estimated parameters. For a given model and its parameters, the weights minimize the variance of the weighted point estimator of the mean; the point and variance estimators formed when these optimal weights are applied are unbiased. The time-series identification procedure and estimation of the parameters and weights bring in bias. Formulas for optimal weights are given for AR(p) and MA(1) processes.

Experiments were conducted on AR(1), AR(2), and MA(2) processes as well as on the M/M/1 queue delay process and a periodic inventory system cost process. Results show that for processes with strong correlation over many lags, as is typical in queue-delay processes and inventory processes, the achieved coverage of the constructed interval is closer to nominal levels than for the unweighted-batch-means method. The coverage and average half-length is not as greatly affected by the number of batches, and nonnormality of the weighted batch means is not as severe.
Large Fluctuations in a Deterministic Multiclass Network of Queues
Authors: Whitt Ward
Published: November 2008

In this paper we investigate a relatively simple deterministic four-class two-queue multiclass open network of single-server FIFO queues with traffic intensity one at each queue. Our purpose is to better understand the effect of feedback with class-dependent service times at the queues. The example is sufficiently tractable that we are able to describe its transient behavior in great detail. The transient behavior depends strongly on the initial conditions and, for some initial conditions, the sample paths of the queue-length processes at individual stations have sudden large fluctuations (a large jump up followed immediately by a large jump down). These large fluctuations occur because batches of customers with short service times build up in the queues. Consistent with recent work by Dai and Wang (1993) on Brownian network models, these fluctuations rule out conventional heavy-traffic limit theorems. We show how to obtain proper heavy-traffic limits for this example by weakening the topology or enlarging the space of prospective limits (and changing the topology). This example also dramatically demonstrates a disadvantage of the FIFO discipline compared to other disciplines like head-of-the-line processor-sharing (HOL-PS) among the classes at each queue (under which, the large fluctuations do not occur). Finally, the critical arrival rate for stability in our example actually depends on the service discipline, being even lower if the classes with longer service times are given high priority at each queue. This phenomenon can occur in the network setting because individual queues can be empty when there is work in the network.
Portfolio Choices in the Presence of Other Risks
Authors: Finkelshtain Israel , Chalfant James A.
Published: November 2008

The effects of multivariate risk are examined in a model of portfolio choice. The conditions under which portfolio choices are separable from consumption decisions are derived. Unless the appropriate restrictions hold on investors' preferences or on the probability distribution of risks, the optimal portfolio is affected by other risks. This requires generalizing the usual measures of risk aversion. With one risky asset, matrix measures of risk aversion are used to generalize the results of Arrow (1965) and Pratt (1964) concerning the effects of risk aversion and wealth on the optimal portfolio. With two risky assets, the choices made by two investors coincide if and only if their generalized risk-aversion measures are identical. Ross's notion of stronger risk aversion is then used to characterize the effect of risk aversion on the level of investment in the riskier asset.
The Identification of Solution Ideas During Organizational Decision Making
Authors: Nutt Paul C.
Published: November 2008

This research investigated the idea development stage of a strategic decision making process. The tactics that decision makers apply to identify ideas were uncovered from a systematic study of 168 decision cases. These tactics and contextual factors describing the decision situation were analyzed to determine how each influences success measured by decision merit, development time, initial adoption, and sustained adoption. A “synthesized template” which integrated useful practices and procedures from several sources had the most success, but this tactic was seldom used. A “cyclical search” in which repeated searches were carried out to learn about opportunities was quite successful when used under conditions of low importance, low urgency, and good staff support. The success of the design tactic, which calls for innovation, improved when urgency was present and multiple alternatives were sought. The idea tactic which imposed a fully developed solution was widely used and seldom successful.
Better Estimation of PERT Activity Time Parameters
Authors: Keefer Donald L. , Verdini William A.
Published: November 2008

This paper builds upon earlier work from the decision/risk analysis area in presenting simple, easy-to-use approximations for the mean and variance of PERT activity times. These approximations offer significant advantages over the PERT formulas currently being taught and used, as well as over recently proposed modifications. For instance, they are several orders of magnitude more accurate than their PERT counterparts in estimating means and variances of beta distributions if the data required for all methods are obtained accurately. Moreover, they utilize probability data that can be assessed more reliably than those required by the PERT formulas, while still requiring just three points from each activity time probability distribution. Using the proposed approximations can significantly improve the accuracy of probability statements about project completion time, and their use complements ongoing efforts to improve PERT analyses of networks involving multiple critical paths.
Multivariate Autoregressive Techniques for Constructing Confidence Regions on the Mean Vector
Authors: Charnes John M. , Kelton W. David
Published: November 2008

We develop a method for constructing confidence regions on the mean vectors of multivariate processes that is based on a vector autoregressive (VAR) representation of the data-generating process. A confidence-region-construction algorithm for a general autoregressive model is given. We establish the asymptotic validity of the confidence-region estimator (that is, the exact achievement of nominal coverage probability as the sample size tends to infinity) when the output process is a stationary vector autoregressive process of known, finite order. With respect to confidence-region volume, coverage probability, and execution time, we carry out an experimental performance comparison of VAR versus the methods of Bonferroni Batch Means (BBM), Multivariate Batch Means (MBM), and Multivariate Spectral Analysis (SPA). The experimental results indicate that (i) VAR delivered confidence regions with the smallest volume; (ii) BBM delivered confidence regions with the largest volume, the highest coverage and the smallest execution time; (iii) in small samples, all of the methods might yield confidence-region estimators whose coverage differs significantly from the nominal level; and (iv) in large samples for which the sample autocorrelation function indicates a vector autoregressive dependence structure, VAR is a viable technique for simulation output analysis.
Investigating the Sensitivity of Equilibrium Profits to Advertising Dynamics and Competitive Effects
Authors: Chintagunta Pradeep K.
Published: November 2008

The author investigates the validity of the “flat maximum principle”—the insensitivity of a firm's profits to changes in its optimal advertising level—in a duopolistic market in which advertising by the two firms has carryover effects. Two alternative competitive scenarios are examined (i) in which total industry sales are allowed to vary over time, and (ii) where firms are engaged in market share rivalry. For (i), the open-loop Nash equilibrium advertising strategies for the firms are derived assuming a specific sales response function and an infinite time horizon. A numerical analysis of the sensitivity of firms' profit functions to advertising expenditures is performed at different levels of the (a) discount rate, (b) advertising elasticity, and (c) advertising decay rate. An empirical illustration from the pharmaceutical industry is provided. Special cases of the model formulation are examined analytically in order to highlight the intuition behind the flatness of the maximum and to study the sensitivity of results obtained to choice of equilibrium strategy (closed-loop vs. open-loop). For the market share game, closed-loop policies are considered and the flat maximum principle is illustrated in the context of Coke–Pepsi rivalry in the soft drinks market.
Large Data-Handling Equipment as a Commercial Tool
Authors: Postley John A.
Published: November 2008

The primary purpose of this paper is to present for management an approach to the employment of large data-handling equipment in commercial problems. This approach is in the form of guideposts which, in a very general way, may indicate to people without a background in the data processing field, major requirements to consider or problems which will be encountered in connection with this employment. The problem arises in the military departments largely in connection with logistics and throughout non-military governmental and nongovernmental operations.
On a Class of Minimum-Cost Problems
Authors: Karush William
Published: November 2008

The following type of problem has arisen in various contexts in applications of management science: to determine a program of future levels of activity (e.g., production or employment) subject to known future requirements, which will minimize the total cost of the projected program over the entire planning interval of time. Mathematical methods have been developed for treating variants of this problem, and the purpose of this paper is to present an outline of methods appropriate to problems which share a certain common mathematical form.
Discussion—Mathematics, Realism and Management Sciences
Authors: Greenhut Melvin L.
Published: November 2008

In a paper which appeared in the 1957 edition of this journal (Weinwurm, Ernest H. 1957. Limitations of the scientific method in management science. Management Sci. (April) 225–233.), Professor Weinwurm suggests that the use of mathematics in management science may so dominate a given model as to cause the disregard of vital human values. He cites Professor Bodenhorn who warns that the trend toward mathematical frameworks in economics may be associated with an application of good mathematical assumptions but poor economics (Bodenhorn, Diran. 1956. The problem of economic assumptions in mathematical economics. J. Political Econom. (February) 25–32.). In some dispute with Professor Flood's philosophy (Flood, Merrill M. 1956. The objective of TIMS. Management Sci. (January) 178–183.), he feels that we cannot ignore the nonquantitative factors in human relations.
The Institute in Action—TIMS 1957 Presidential Address
Authors: Crane Roger R.
Published: November 2008

My predecessors, the three former presidents of The Institute of Management Sciences, have already established something of a tradition for the TIMS presidential address. Having been involved with the affairs of the Institute during most of a year, they talked about its aims and activities. This address also will concern these activities; in fact, that is its title: The Institute in Action. Before this address is over I hope you will have reflected on something which you already know and that you will carry this thought with you, if no other, when you leave. You are the Institute and the Institute in Action is you in action.
The International Conference on Operations Research: A Report
Authors: Hertz David Bendel
Published: November 2008

The Institute of Management Sciences joined with the Operations Research Society of America, and with The Operational Research Society of the United Kingdom, to co-sponsor an International Conference on Operations Research. This is a report about this conference.
Greenhouses of Science for Management
Authors: Goode Harry H.
Published: November 2008

The “Management Sciences” must have a science foundation upon which to build a structure to serve management. To date, the sciences making the greatest contribution have been mathematical and physical in nature. But theory, experimental design, and measurement are rapidly revolutionizing our knowledge of the human being so that the psychological and biological sciences may be expected to make a greater and greater contribution to the management sciences. This paper reports the work being done on the research frontier at the University of Michigan in connection with organisms as systems, the reactions of groups, models of human preference, the experimental exploration of human observation, detection, and decision making, and the analysis and synthesis of speech. While these areas are not useful for immediate application at the user's level in the management sciences, a recent symposium on the subject provided a short tour through these greenhouses of science for management from which applicable science may be expected to emanate. The material of the symposium will be reported in the paper.
Diversification
Authors: Morris William T.
Published: November 2008

The logical structure of diversification as a management policy is discussed through the use of simple examples. For a decision maker who maximizes expectation in the face of uncertain prospects, the kinds of utility functions which lead to the use of diversification are explored. It is shown that conditions of positive but decreasing marginal utility must prevail, and the conditions for optimal diversified programs are given. The use of diversification as a policy for the reduction of variance of outcomes is discussed. For a decision maker whose choices are rationalized in terms of aspiration levels, the situations in which this policy might be used are also explored.
A Linear Programming Model of Integrated Iron and Steel Production
Authors: Fabian Tibor
Published: November 2008

Integrated steel mills usually have a choice over the use of various materials and production processes. Different ores may be used in the production of iron; steel scrap and iron can be used in different proportions in the production of steel. The economical usage rate of all materials is a function of numerous variables, among which the market price of some materials, notably of various grades of steel scrap, fluctuates and therefore requires a periodic determination of the economical usage rate. This is a typical problem for programming.

The paper presents a mathematical formulation of the stages of iron and steel production to determine the optimal (least cost) rate of input of materials. The models of the various stages of production are connected to form a “master model” of an integrated steel mill.
Notes: On the Concept of Universal Knowledge in Organizational Science: Implications for Cross-National Research
Authors: Cheng Joseph L. C.
Published: November 2008

This paper argues that the present conception of universal knowledge as generalized findings is incomplete and has limited the role of cross-national research to one of validating results obtained from single-nation studies. An alternative view is proposed which recognizes that there are two types of research findings that can be applied cross-nationally: (1) findings that are invariant across different national settings, and (2) findings that incorporate the societal context into the analysis of the phenomenon under study. This conception of universal knowledge is more inclusive in scope and suggests an expanded role for cross-national research in organizational inquiry. The new role will offer exciting opportunities for the field of organizational science, including its enhanced ability to discover knowledge that has both universal applicability and global relevance.
When Can Management Science Research Be Generalized Internationally?
Authors: Rosenzweig Philip M.
Published: November 2008

Discussion about international generalizability has rarely addressed the full scope of management science research. This paper identifies a number of obstacles to international generalizability, and shows how they affect technical systems research and social systems research in different ways. Examples of management science research are examined critically for their validity elsewhere in the world. Implications are discussed for the interpretation of existing research and for the design of research.
Analyzing Cross-National Management and Organizations: A Theoretical Framework
Authors: Lachman Ran , Nedd Albert , Hinings Bob
Published: November 2008

The differential social control embedded in core and periphery values indigenous to a cultural setting, and the availability of resources in that setting, are discussed as critical factors for the effective adaptation of organizations and management practices transferred across cultural boundaries. The relationships between these factors and organizational structure, processes, and behavior, are analyzed and specified in a theoretical framework. The framework postulates the importance of congruent or, at least, accommodative relationships between the core values dominating the local setting, and those underlying transferred practices for the effectiveness of “imported” organizational practices. Four main contingencies of local-imported values' incongruence are described, and their implications for “entry” and “coping” strategies of cross-national organizations are discussed. The framework also offers a scheme for generating hypotheses regarding the effects of values on structures and behavior in cross-national organizations. The theoretical and managerial implications of the scheme are discussed and illustrated.
Explorations of Negotiation Behaviors in Ten Foreign Cultures Using a Model Developed in the United States
Authors: Graham John L. , Mintu Alma T. , Rodgers Waymond
Published: November 2008

The universality of a problem-solving model of business negotiations is explored using 700 business people from 11 cultures as participants in a bargaining simulation. Both theoretical and measurement issues are considered using structural equations and partial least squares as the primary data analysis approaches. The results regarding the universality question are equivocal—findings varied across cultural groups in most cases. However, the theoretical model still appears to be a useful tool for understanding how business negotiations vary across cultural groups.
Appointment Methods for the House of Representatives and the Court Challenges
Authors: Ernst Lawrence R.
Published: November 2008

Four different methods have been used to apportion the seats in the United States House of Representatives among the states following the decennial census. The current method, the method of equal proportions, has been used for each census since 1940. In 1991, for the first time in U.S. history, the constitutionality of an apportionment method was challenged in court, by Montana and Massachusetts in separate cases. Montana proposed two methods as alternatives to equal proportions, the methods of harmonic means and smallest divisors, while Massachusetts proposed the method of major fractions. On March 31, 1992, in a unanimous decision, the U.S. Supreme Court upheld the constitutionality of equal proportions. This author wrote the declarations on the mathematical and statistical issues used by the defense in these cases. The declarations in the Massachusetts case contain several new theoretical and empirical results. This paper discusses the technical issues in these cases together with a brief history of the apportionment problem.
Information Asymmetry, Participation, and Long-Term Contracts
Authors: Sivaramakrishnan K.
Published: November 2008

This paper examines the economic value of participative processes in the setting of long-term incentives. When informational asymmetries arise between employers (supervisors) and employees (subordinates) about future states, questions arise as to whether and when resolving these informational asymmetries produces economic gains. To address these questions, I use a two-period principal agent contracting framework in which the agent (employee) receives imperfect private information about the second period state in the first period, and make a welfare comparison between two alternative communication regimes.

In the “delayed communication regime,” a report from the agent is considered only for second period contract. In the “early communication regime,” the report is considered for first period contracting as well. This regime can therefore be viewed as encouraging participation in long-term contracts. I identify conditions under which the early communication regime is strictly preferable to the delayed communication regime. Further, given some additional structure on the agent's preferences, this result obtains even if the agent can access capital markets to smooth inter-temporal consumption.

Finally, I examine the setting in which the principal, at the time of contracting, has the option of whether or not to install an information system that provides the agent with private information about the future period state. I identify conditions under which installing the information system, and resolving the consequent information asymmetry through participation, is strictly preferable to not installing the information system.
Evaluating Echelon Stock (R, nQ) Policies in Serial Production/Inventory Systems with Stochastic Demand
Authors: Chen Fangruo , Zheng Yu-Sheng
Published: November 2008

This paper studies echelon stock (R, nQ) policies in serial production/inventory systems with stochastic demand. We provide a recursive procedure to compute the steady state echelon inventory levels of the systems, which can be used to evaluate the long-run average holding and backorder costs as well as other performance measures. The procedure is based upon an observation of a relationship between the inventory status of adjacent stages in a serial system. We also device exact formulas for replenishment frequencies and setup costs. Our results apply to both continuous-review systems with compound Poisson demand and periodic-review systems with independent, identically distributed demands. A preliminary numerical study was conducted to explore the cost effectiveness of echelon stock (R, nQ) policies. For two-stage systems with simple Poisson demand, we compared among the minimum costs of echelon stock (R, nQ) policies, a lower bound on the minimum achievable costs, and the minimum costs of installation stock (R, nQ) policies. Finally, we present a modification of an existing approximate evaluation procedure.
Approximation Procedures for the One-Warehouse Multi-Retailer System
Authors: Lu Lu , Posner Marc E.
Published: November 2008

Two heuristic procedures for a one-warehouse multi-retailer system are developed. Based on the accuracy desired, the first heuristic evaluates a specified number of points. The relative error is within a bound that approaches 1/(√2 ln 2) − 1 ≈ 2.014%. The complexity of the heuristic is O(n) for a fixed number of evaluations. Although our bound only approaches the one of Roundy (1985), when only a small number of points are evaluated, our method is faster. We show that the bound for our procedure and two bounds proposed by Roundy (1985) are tight.

The second heuristic pertains to a class of polities called stationary interval policies. For this class of policies, we develop a fully polynomial-time approximation scheme where the relative error is within ε > 0, and the computational effort increases as a linear function of 1/√ε.

Computational experiments show that these heuristics perform well in practice.
Investigating the Relationship Between Time in Market and Pioneering Advantage
Authors: Brown Christina L. , Lattin James M.
Published: November 2008

In field studies based on pre-test market and scanner data, researchers have found evidence of pioneering advantage in the form of an order-of-entry effect: a permanent share advantage that is greatest for the first brand to enter a market and smaller for each subsequently entering brand. Conceptually, an order-of-entry effect implies that the share advantage of a market pioneer over the second entrant is constant, regardless of the length the of time the pioneer is alone in the market or the length of time since the entry of the second brand. We argue that pioneering advantage is also related to a brand's length of time in the market: the longer the brand's time in market (during which time it can impact consumer learning and influence consumer perceptions and preferences), the greater its relative share advantage. We present a parsimonious model of this time-in-market effect and test of model using two data sources: cross-category data collected and analyzed by Urban et al. (1986) and regional roll-out data for a single product category.
A Heuristic Scheduling Policy for Multi-Item, Multi-Machine Production Systems with Time-Varying, Stochastic Demands
Authors: Gonçalves José F. , Leachman Robert C. , Gascon André , Xiong Zhong K.
Published: November 2008

An effective scheduling policy known as the Dynamic Cycle Lengths Heuristic was introduced by Leachman and Gascon in 1988 for the multi-item, single-machine production system facing stochastic, time-varying demands. In this article we develop a heuristic scheduling policy for the multi-machine extension of the same problem. We integrate the concepts of the Dynamic Cycle Lengths Heuristic with a nonlinear integer optimization model to obtain an overall scheduling policy that allocates items to machines and schedules production quantities during the next time period. We report promising performance in limited simulation tests of the policy.
Does Information Technology Lead to Smaller Firms?
Authors: Brynjolfsson Erik , Malone Thomas W. , Gurbaxani Vijay , Kambil Ajit
Published: November 2008

Many changes in the organization of work in the United States since 1975 have been attributed to the increased capabilities and use of information technology (IT) in business. However, few studies have attempted to empirically examine these relationships. The primary goal of this paper is to assess the hypothesis that investments in information technology are at least partially responsible for the important organizational change, the shift of economic activity to smaller firms. We examine this hypothesis using industry-level data on IT capital and four measures of firm size, including employees and sales per firm. We find broad evidence that investment in IT is significantly associated with subsequent decreases in the average size of firms. We also find that these decreases in firm size are most pronounced two to three years after the IT investment is made.
Business and Technology Strategies and New Venture Performance: A Study of the Telecommunications Equipment Industry
Authors: Dowling Michael J. , McGee Jeffrey E.
Published: November 2008

In this paper, a set of hypotheses relating competitive and cooperative business strategies and technology strategies to new venture performance are developed. These hypotheses are tested using data collected from the Initial Public Offering (IPO) documents of a sample of 52 new ventures in the telecommunications equipment industry. This industry has experienced a great deal of technological change as computer and telephone technologies have merged allowing a variety of new ventures to successfully enter the industry. The results suggest that new ventures pursuing broad cost leadership strategies were more successful. Investments in innovation in terms of relative R&D expenditures were also related to higher performance. Finally, significant interaction effects between investments in innovation and competitive strategies and performance were found.
The Strategic Use of Capacity Slack in the Economic Lot Scheduling Problem with Random Demand
Authors: Bourland Karla E. , Yano Candace A.
Published: November 2008

Growing interest in designing systems with capacity slack as one form of flexibility raises many questions about its use and its usefulness. In the framework of the economic lot scheduling problem with stochastic demand, we develop on optimization-based model that considers capacity slack, safety stock, and overtime explicitly, and has the objective of minimizing the expected cost per unit time of inventory, overtime, and, where applicable, setup costs. The solution is a continuous-time production plan that consists of a time-dependent inventory trajectory for each of the parts, including the placement of planned idle time in the schedule. We consider schedule stability to be desirable because of potential effects on upstream and downstream operations in multistage production settings. Thus, the plan also has certain characteristics that contribute to achieving stability.

Our results on the relative merits of capacity slack and safety stock indicate that capacity slack in the form of planned idle time is not a cost-effective hedge against demand uncertainty in this context. Thus, it is essential that management carefully identify and evaluate other reasons for including idle time in a plan, and use the idle time effectively. For managers who face situations not fully represented by our model, this paper provides analytic results that will guide them in the placement of planned idle time and the choice of safety stock levels.
Evolutionary Trajectories in Petroleum Firm R&D
Authors: Helfat Constance E.
Published: November 2008

Tacit knowledge and cumulative learning underlie an evolutionary theory of business firm development and strategy. As one test case of the theory, this study examines firms' applied research and development activities. Evolutionary theory suggests that firms within an industry will tend both to persist and to differ in the amount of effort they devote to various R&D applications. A test of the hypothesis of presistent differences in R&D, using uniquely detailed data from the petroleum industry, provides support for evolutionary theory.
Dynamic Optimal Control Models in Advertising: Recent Developments
Authors: Feichtinger Gustav , Hartl Richard F. , Sethi Suresh P.
Published: November 2008

This paper presents a review of recent developments that have taken place in the area of dynamic optimal control models in advertising subsequent to the comprehensive survey of the literature by Sethi in 1977. The basic problem underlying these models is that of determining optimal advertising expenditures and possibly other variables of interest over time for a firm or a group of competing firms under consideration. This optimization is done subject to some dynamics that define how these variables translate into sales and in turn, into profits. The purpose of this update is twofold. On the one hand, new contributions in the areas already treated in the earlier survey are reviewed. On the other hand, new trends in the advertising literature since 1977, such as quality as an additional marketing instrument, cumulative sales models, pulsing advertising, and advertising as a part of corporate models of the firm, are discussed. The models covered in this update are organized under six headings: models with capital stocks generated by advertising, price, and quality, sales-advertising response models, cumulative sales models for durable goods, models with more than one state variables in the advertising process, models incorporating interaction with other functional areas, and competitive models. The discussion involves specifications, methods used, results, empirical validation, if any, and their economic significance. The survey concludes with suggestions for extensions and future directions of research.
A Periodic Review, Production Planning Model with Uncertain Capacity and Uncertain Demand—Optimality of Extended Myopic Policies
Authors: Ciarallo Frank W. , Akella Ramakrishna , Morton Thomas E.
Published: November 2008

Increasing product complexity, manufacturing environment complexity and an increased emphasis on product quality are all factors leading to uncertainties in production processes. These uncertainties are in the form of unplanned machine maintenance, varying production yields and rework, among others. In planning for production, an adequate model must incorporate these uncertainties into the representation of the production process.

This paper treats the aggregate planning problem for a single product with random demand and random capacity. In the single-period problem, random capacity does not affect the optimal policy but results in a unimodal, nonconvex cost function. In the multiple-period and infinite-horizon settings order-up-to policies that are dependent on the distribution of capacity are shown to be optimal in spite of a nonconvex cost. In the infinite-horizon setting an intuitive description of the situation leads to the notion of a class of extended myopic policies, requiring the consideration of review periods of uncertain length.
A Disaggregate Negative Binomial Regression Procedure for Count Data Analysis
Authors: Ramaswamy Venkatram , Anderson Eugene W. , DeSarbo Wayne S.
Published: November 2008

Various research areas face the methodological problems presented by nonnegative integer count data drawn from heterogeneous populations. We present a disaggregate negative binomial regression procedure for analysis of count data observed for a heterogeneous sample of cross-sections, possibly over some fixed time periods. This procedure simultaneously pools or groups cross-sections while estimating a separate negative binomial regression model for each group. An E-M algorithm is described within a maximum likelihood framework to estimate the group proportions, the group-specific regression coefficients, and the degree of overdispersion in event rates within each derived group. The proposed procedure is illustrated with count data entailing nonnegative integer counts of purchases (events) for a frequently bought consumer good.
“Sticky Information” and the Locus of Problem Solving: Implications for Innovation
Authors: von Hippel Eric
Published: November 2008

To solve a problem, needed information and problem-solving capabilities must be brought together. Often the information used in technical problem solving is costly to acquire, transfer, and use in a new location—is, in our terms, “sticky.” In this paper we explore the impact of information stickiness on the locus of innovation-related problem solving. We find, first, that when sticky information needed by problem solvers is held at one site only, problem solving will be carried out at that locus, other things being equal. Second, when more than one locus of sticky information is called upon by problem solvers, the locus of problem solving may iterate among these sites as problem solving proceeds. When the costs of such iteration are high, then, third, problems that draw upon multiple sites of sticky information will sometimes be “task partitioned” into subproblems that each draw on only one such locus, and/or, fourth, investments will be made to reduce the stickiness of information at some locations.

Information stickiness appears to affect a number of issues of importance to researchers and practitioners. Among these are patterns in the diffusion of information, the specialization of firms, the locus of innovation, and the nature of problems selected by problem solvers.
Efficient Algorithms for Stochastic Dominance Tests Based on Financial Market Data
Authors: Aboudi Ronny , Thon Dominique
Published: November 2008

It is known that when the random variables being compared have a uniform probability measure, as is the case when using financial market data, the computation of efficient sets for first- and second-degree dominance can be greatly simplified if majorization conditions are used instead of the dominance definitions. This paper presents an equally efficient technique for third-degree dominance.
Determinants of Electronic Integration in the Insurance Industry: An Empirical Test
Authors: Zaheer Akbar , Venkatraman N.
Published: November 2008

Electronic integration—a form of vertical quasi-integration achieved through the deployment of dedicated computers and communication systems between relevant actors in the adjacent stages of the value-chain—is an important concept to researchers in the information systems field since it focuses on the role of information technology in restructuring vertical relationships. Drawing on theoretical and empirical research on transaction costs, we develop and test a model of the determinants of the degree of electronic integration in the commercial segment of the property and casualty (P&C) industry. Based on a sample of 120 independent agencies operating under dedicated information technology-mediated conditions, we provide empirical support for three hypotheses on the determinants of electronic integration. Implications and research extensions are identified to guide further research in this important area.
Optimizing Inventory Levels in a Two-Echelon Retailer System with Partial Lost Sales
Authors: Nahmias Steven , Smith Stephen A.
Published: November 2008

This paper considers a retailer inventory system with N first-echelon stores and a single second-echelon distribution center (DC). Customer demands at the stores are assumed to be random. When a stockout occurs, customers are willing to wait for their order to be filled with a known probability. Customers who are unwilling to wait result in lost sales. The first and second echelons are both restocked at fixed, equally spaced time points, where the store restocking frequency is an integer multiple of the DC restocking frequency. We also assume that replenishment quantities at both echelons can be adjusted up to the time of delivery, resulting in replenishment lead times equal to zero. This simplification allows us to determine optimal solutions for the partial lost sales case, which has proven intractable for two-echelon formulations with lead times. Computational results are given for illustrative examples.
Marginal Conditional Stochastic Dominance
Authors: Shalit Haim , Yitzhaki Shlomo
Published: November 2008

This paper introduces the concept of Marginal Conditional Stochastic Dominance (MCSD), which states the conditions under which all risk-averse individuals, when presented with a given portfolio, prefer to increase the share of one risky asset over that of another. MCSD rules also answer the question of whether all risk-averse individuals include a new asset in their portfolio when assets' returns are correlated. MCSD criteria are expressed in terms of the probability distributions of the assets and of the underlying portfolio. An empirical application of MCSD is provided using stocks traded on the New York Stock Exchange. MCSD rules are used to show that, in the long run, one cannot assert that the market portfolio is inefficient.
Buyers' Pricing Behavior for Risky Alternatives: Encoding Processes and Preference Reversals
Authors: Casey Jeff T.
Published: November 2008

Numerous studies have examined individuals' minimum selling prices or certainty equivalents for lotteries as measures of preference, but few have examined maximum buying prices. Because every transaction involves a buyer as well as a seller, buyers' pricing behavior is of interest in its own right. Two prospect theory based descriptive models of maximum buying prices—the integration and segregation models—are developed from different assumptions about cognitive encoding processes. The models were tested experimentally using an incentive-compatible cash payoff scheme in which maximum buying prices for bets and choices between bets were elicited from subjects. Surprisingly, observed maximum buying prices were far below expected values even for bets with probabilities of winning near 1.0. This suggests buyers are strongly influenced by loss aversion and that the conventional assumption that the buying price for a risky alternative is a reduction in the alternative's payoffs fails to describe behavior. Instead, it appears subjects predominately employed a segregation encoding process in which the buying price was encoded separately from the bet's payoffs and treated as a sure loss. However, an additional result was not explained adequately by either encoding model: Buying prices were less risk averse than choices for $3 expected value bets—creating preference reversals of the standard kind (Lichtenstein and Slovic 1971)—but more risk averse for $100 expected value bets—creating reverse preference reversals (Casey 1991). Implications for the scale compatibility principle (Tversky et al. 1988) are discussed. Two theoretical approaches are outlined which offer promise in the development of a unified model of price judgments and choice preferences under risk.