bluuebunny/crossref_metadata_2025 huggingface dataset:
Asymptotics of Likelihood Ratio Derivative Estimators in Simulations of Highly Reliable Markovian Systems
Authors: Nakayama Marvin K.
Published: November 2008

We discuss the estimation of derivatives of a performance measure using the likelihood ratio method in simulations of highly reliable Markovian systems. We compare the difficulties of estimating the performance measure and of estimating its partial derivatives with respect to component failure rates as the component failure rates tend to 0 and the component repair rates remain fixed. We first consider the case when the quantities are estimated using naive simulation; i.e., when no variance reduction technique is used. In particular, we prove that in the limit, some of the partial derivatives can be estimated as accurately as the performance measure itself. This result is of particular interest in light of the somewhat pessimistic empirical results others have obtained when applying the likelihood ratio method to other types of systems. However, the result only holds for certain partial derivatives of the performance measure when using naive simulation. More specifically, we can estimate a certain partial derivative with the same relative accuracy as the performance measure if the partial derivative is associated with a component either having one of the largest failure rates or whose failure can trigger a failure transition on one of the “most likely paths to failure.” Also, we develop a simple criterion to determine which partial derivatives will satisfy either of these properties. In particular, we can identify these derivatives using a sensitivity measure which can be calculated for each type of component.

We also examine the limiting behavior of the estimates of the performance measure and its derivatives which are obtained when an importance sampling scheme known as balanced failure biasing is used. In particular, we show that the estimates of all derivatives can be improved. In contrast to the situation that arose when using naive simulation, we prove that in the limit, all derivatives can be estimated as accurately as the performance measure when balanced failure biasing is employed.

Finally, we formalize the notion of a “most likely path to failure” in the setting of highly reliable Markovian systems. We accomplish this by proving a conditional limit theorem for the distribution of the sample paths leading to a system failure, given that a system failure occurs before the system returns to the state with all components operational. We use this result to establish our other results.
Quadratic-Variation-Based Dynamic Strategies
Authors: Bick Avi
Published: November 2008

The paper analyzes a family of dynamic trading strategies which do not rely on any stochastic process assumptions (aside from continuity and positivity) and in particular do not require predicting future volatilities. Derivative payoffs can still be replicated, except that this occurs at the stopping time at which the “realized cumulative squared volatility” hits a predetermined level. The application of these results to portfolio insurance is emphasized, and hedging strategies studied by Black and Jones and by Brennan and Schwartz are generalized. Classical results on European-style options arise as special cases. For example, the initial cost of replicating a call or a put under the new method is given by a generalized Black-Scholes formula, which yields the ordinary Black-Scholes formula when the volatility is derterministic.
Note: On the Interchange of Derivative and Expectation for Likelihood Ratio Derivative Estimators
Authors: L'Ecuyer Pierre
Published: November 2008

Sufficient conditions for the validity of interchange between derivative and expectation, in the context of likelihood ratio gradient estimation, were given in L'Ecuyer (1990). The aim of this paper is to shed additional light on these conditions and introduce specific variants of them, which are often easier to check. Sufficient conditions for the derivative estimator to have finite moments up to a given order are also given and illustrated by examples. In particular, we give an example of an unbiased derivative estimator which satisfies the interchange conditions but which has infinite variance.
An Experimental Investigation into the Efficacy of Visual Interactive Simulation
Authors: Bell Peter C. , O'Keefe Robert M.
Published: November 2008

The use of a Visual Interactive Simulation (VIS) model for experimental analysis, where the user initiates runs and gathers information as desired without necessarily any respect for formal analysis, is encouraged by some proponents of VIS and VIS software packages. Proponents of formal output analysis view this approach as dangerous and irresponsible.

We designed and executed a laboratory experiment in which 51 subjects solved a case study based around the allocation of trucks in a mining operation in order to investigate the efficacy of VIS to model experimentation. Subjects were provided with a VIS, developed by the authors, which contained a terminating simulation of the system and two different displays: an animation and a dynamically changing histogram. The user could halt execution of the model and change the truck allocation at any time.

We found that subjects performed badly relative to a known solution obtained through detailed formal experimentation but performed well compared to solutions they provided prior to use of the model. Use of the animated display was not associated with correct solutions but was associated with more efficient use of the VIS. Subjects who obtained a correct solution investigated fewer alternatives and used fewer interactions than those obtaining incorrect solutions. Finally, we found a significant difference in the process used between subjects providing correct and incorrect solutions.
The Application of Ranking Probability Models to Racetrack Betting
Authors: Lo Victor S. Y. , Bacon-Shone John , Busche Kelly
Published: November 2008

Hausch et al. (HZR) (Hausch, D. B., W. T. Ziemba, M. Rubinstein. 1981. Efficiency of the market for racetrack betting. Management Sci. 27 1435–1452.) developed a betting system that demonstrated positive profits at two racetracks. The system assumes running times are distributed exponentially, but other distributions for running times (Henery [Henery, R. J. 1981. Permutation probabilities as models for horse races. J. Roy. Statist. Soc. B 43(1) 86–91.] and Stern [Stern, H. 1990. Models for distributions on permutations. J. Amer. Statist. Assoc. 85(410) 558–564.]) have been shown to produce a better fit in Bacon-Shone et al. (1992a), Lo (Lo, V. S. Y. 1994. Application of running time distribution models in Japan. D. B. Hausch, V. S. Y. Lo, W. T. Ziemba, eds. Efficiency of Racetrack Betting Markets. Academic Press, 237–247.), and Lo and Bacon-Shone (Lo, V. S. Y., J. Bacon-Shone. 1994. A comparison between two models for predicting ordering probabilities in multi-entry competitions. The Statistician 43(2) 317–327.) using data from Hong Kong, the Meadowlands, and Japan. The better fit is at the cost of severely increased complexity in computing ranking probabilities, though. In response, Lo and Bacon-Shone (Lo, V. S. Y., J. Bacon-Shone. 1992. An Approximation to Ordering Probabilities of Multi-entry Competitions. Research Report 16, Department of Statistics, University of Hong Kong.) proposed a simple model of computing ranking probabilities which closely approximates those based on the Henery and the Stern models and fits the data as well. This paper couples the Lo and Bacon-Shone model and the HZR system. For data sets from the United States and Hong Kong, we show improved profit over the HZR system at lower levels of risk using final betting data assuming zero computational costs. With data from Japan, our model shows little difference in profits from the HZR system.
Production Organisation and Risk Control When Market Instruments Are Available
Authors: Bowden Roger J.
Published: November 2008

A standard result in the theory of production under price risk is that if forward cover is available, production is determined in terms of the known, quoted forward or futures price, rather than expectations of future prices. In practice, however, primary production often involves joint or substitutable products, so that a natural hedge may be available. In addition, costs such as input prices or interest rates are highly variable and may be correlated with output prices. Supply risk adds to this variation. This paper considers the demand for market-based hedging instruments in relation to such natural hedges and to the possible use of storage for hedging purposes. Under normality of conditional price/cost variation it is shown that for relatively arbitrary nonlinear production technologies and attitudes to risk, producers can plan production and derive their demand for futures by decomposing the organisation into a number of activity centres, involving planning, marketing, cost, and treasury functions. Adding up the hedging demands from each centre, and equating to the effective supply of each type of hedge (natural and market), yields a linear system that may be solved for the optimum quantities of each hedge contract.
Sensitivity to the Service-Time Distribution in the Nonstationary Erlang Loss Model
Authors: Davis Jimmie L. , Massey William A. , Whitt Ward
Published: November 2008

The stationary Erlang loss model is a classic example of an insensitive queueing system: the steady-state distribution of the number of busy servers depends on the service-time distribution only through its mean. However, when the arrival process is a nonstationary Poisson process, the insensitivity property is lost. We develop a simple, effective numerical algorithm for the Mt/PH/s/0 model with two service phases and a nonhomogeneous Poisson arrival process, and apply it to show that the time-dependent blocking probability with nonstationary input can be strongly influenced by the service-time distribution beyond the mean. With sinusoidal arrival rates, the peak blocking probability typically increases as the service-time distribution gets less variable. The influence of the service-time distribution, including this seemingly anomalous behavior, can be understood and predicted from the modified-offered-load and stationary-peakedness approximations, which exploit exact results for related infinite-server models.
Predicting Buyer-Seller Pricing Disparities
Authors: Casey Jeff T.
Published: November 2008

Numerous studies have shown that compensation demanded (CD) to give up a commodity often greatly exceeds willingness to pay (WTP) to obtain the same commodity, even in incentive compatible experiments that penalize strategic misrepresentation. Observed CD/WTP disparities are too large to be reconciled with traditional assumptions of economic rationality. A prospect theory-based behavioral framework for predicting CD and WTP is proposed which produces five distinct transaction encoding rules, any one of which can in principle apply to a buyer or a seller. According to this framework, CD/WTP gaps occur when buyers and sellers encode the prospective transaction differently, and gaps can occur in multiple ways, and vary in size, depending on encoding. The transaction encoding framework was tested in two experiments. In Experiment 1, model fits to subjects' CD and WTP for lottery tickets were consistent with the hypothesis that buyers and sellers encode transaction problems differently. Moreover, the quite large observed CD/WTP gaps were explained fully by encoding: When differences between buyers' and sellers' encoding processes were taken into account, their estimated utility (value) and probability weighting functions did not differ. The present framework and results show that the widely cited endowment effect is but one of several ways in which loss aversion can give rise to CD/WTP gaps. Consistent with this broadened perspective, Experiment 2 demonstrated CD/WTP gaps in the absence of an endowment effect (and in the absence of rational economic causes). The transaction encoding framework (1) provides a structured approach for predicting and testing the effects of a variety of task factors on pricing behavior and transaction outcomes, and (2) reveals the useful property that, in many cases, the ratio CD/WTP can be interpreted as a direct measure of the degree of loss aversion.
Mean-Variance-Instability Portfolio Analysis: A Case of Taiwan's Stock Market
Authors: Lee Shawin , Chang Kuo-Ping
Published: November 2008

This paper applies Talpaz, Harpaz, and Penson's (THP) (Talpaz, H., A. Harpaz, J. B. Penson, Jr. 1983. Risk and spectral instability in portfolio analysis. Eur. J. Oper. Res. 14 262–269.) mean-variance-instability portfolio selection model to eight selected Taiwan stocks during 1980–89 to demonstrate how instability preference affects the traditional mean-variance frontier. In contrast to THP's finding, the empirical results show that Taiwan's high-frequency stocks have high, not low, variance. This indicates that Taiwan investors, unlike U.S. investors, prefer to speculate in high-variance stocks. The empirical results also show that short selling may increase the risk of the portfolio when the investor is instability preferred.
Professional Service Organizations and Focus
Authors: McLaughlin Curtis P. , Yang Shitao , van Dierdonck Roland
Published: November 2008

This paper suggests a framework for operations managers to use in making focus decisions in professional services. This framework is supported empirically from data from the health care industry using three types of data: (1) industry statistics, (2) case studies, and (3) questionnaire surveys. Our objective has been to: (1) gain a better understanding of the concept of focus as it applies to the health care sector, (2) develop a framework to assist service operations managers with focus decisions, and (3) develop a base from which to generalize about micro-focusing decisions in professional services.
Simulation-Based Estimation of Proportions
Authors: Raatikainen Kimmo E. E.
Published: November 2008

Simulated estimates for several proportions are needed in many simulation studies. We propose a method for controlling the length of a simulation run so that the proportions estimated satisfy a prespecified precision requirement.

The method applies the arcsin transform in order to generate confidence intervals with the desired width. The Bonferroni inequality is applied in a new way to construct a rectangular confidence area for the proportions being estimated. Since we are using the Bonferroni inequality, we can use the existing methods developed for estimating the variance of a single mean.

The properties of the method proposed depend on three factors: 1) the arcsin transform, 2) the proposed way of applying the Bonferroni inequality, and 3) the method for estimating the variance. We examine the effects that the transform and the way of applying the Bonferroni inequality have.

Empirical results indicate that the method provides estimates that satisfy the prespecified precision requirement, when the spectral method is used to estimate the variances of the proportions. In addition, simulation runs, when estimating either several proportions or the corresponding mean, are about the same lengths.
Product-Process Development Integration in Manufacturing
Authors: Ettlie John E.
Published: November 2008

Organizations vary greatly in their approaches and success in the introduction of new products and services. In this study, it was proposed that much of this variance can be captured by understanding the extend to which product design and process design are integrated in new program launches. A mailed survey of 43 domestic firms was used to test four propositions concerning product-process development practices. Significantly, it was found that firms using the more rare design-manufacturing personnel integrating mechanisms (engineering job rotation and mobility) have higher sales per employee. Results of a discriminant analysis show that firms benchmarking on product development practices, as contrasted with performance benchmarks, were significantly more likely to use both the rare and the more common forms of design-manufacturing integration (i.e., train personnel in new design, methods, have manufacturing sign-off on design reviews, and restructure, e.g., use teams). Significantly, these firms also report a greater proportion of degreed manufacturing engineers. Not surprisingly, larger firms and business units were found to take longer to develop new products.
Control Modes in International Service Operations: The Propensity to Franchise
Authors: Fladmoe-Lindquist Karin , Jacque Laurent L.
Published: November 2008

What determines a service firm's organizational choice between equity-based control and franchising? This question, which has elicited some theoretical answers and a few empirical tests in a domestic setting, has never been addressed in an international context before. This study explains the mode of control chosen in terms of a theoretical framework which borrows from agency theory and transaction cost analysis. The propensity to franchise internationally was found to be directly related to (i) monitoring costs associated with geographical and “cultural” distance between the principal (franchisor) and its foreign agents (franchisees), (ii) the principal's international experience, and (iii) the degree of host countries' contextual uncertainty but inversely related to the service firm level of brand name asset specificity.
Expert Support Systems for New Product Development Decision Making: A Modeling Framework and Applications
Authors: Liberatore Matthew J. , Stylianou Anthony C.
Published: November 2008

A modeling framework that merges knowledge-based expert systems and decision support systems with management science methods for project evaluation is presented. In particular, the strategic decision to commit to full-scale development of a new product is considered. At the core of the framework are the methods and techniques used for acquiring, modeling and processing the expert knowledge and data. Methods and techniques used include scoring models, logic tables, the analytic hierarchy process, discriminant analysis, and rule-based systems. The suggested modeling approach obtains the benefits of normative modeling as well as the flexibility and developmental advantages of expert systems. Additional benefits include reduced information processing and gathering time, which can help to accelerate the product development cycle. Potential spin-offs of this research include applications for project evaluation throughout the product development cycle and other areas such as capital budgeting. Finally, a series of related case studies that have successfully implemented this framework is described.
Market Provision of Custom Software: Learning Effects and Low Balling
Authors: Whang Seungjin
Published: November 2008

Due to reusability of program code and learning effects in software development, development cost of custom software typically decreases in time and experience. This creates a first-mover advantage to software developers. The paper studies whether the benefits of declining development costs are passed on to buyers in the form of lower prices when developers bid strategically. By using a model of bidding auctions we characterize equilibrium bidding strategies of two software developers. In order to become the first mover and attain future market dominance, developers find it optimal to forgo profits from the first projects. As a result, bid prices (= development cost plus a profit margin to the developer) to the buyers may not necessarily decrease over time, and even if so, not as fast as development cost drops. We also show that bidders expect a higher profit margin from a high-variance project. Thus, if there exist high-variance projects in the future, developers are more likely to submit below-cost bid prices or “low ball.”
Drivers of Customer Satisfaction for Software Products: Implications for Design and Service Support
Authors: Kekre Sunder , Krishnan Mayuram S. , Srinivasan Kannan
Published: November 2008

We study the key determinants of customer satisfaction with software products. Our analysis, based upon a large sample of over 2,500 customer responses, suggests that capability and usability are the critical drivers of overall customer satisfaction. We also find that the importance of seven key satisfaction factors differs across customer and product segments. Our results have significant implications for Quality Function Deployment in making design and service support choices for software products.
Coalition Formation in Standard-Setting Alliances
Authors: Axelrod Robert , Mitchell Will , Thomas Robert E. , Bennett D. Scott , Bruderer Erhard
Published: November 2008

We present a theory for predicting how business firms form alliances to develop and sponsor technical standards. Our basic assumptions are that the utility of a firm for joining a particular standard-setting alliance increases with the size of the alliance and decreases with the presence of rivals in the alliance, especially close rivals. The predicted alliance configurations are simply the Nash equilibria, i.e., those sets of alliances for which no single firm has an incentive to switch to another alliance. We illustrate our theory by estimating the choices of nine computer companies to join one of two alliances sponsoring competing Unix operating system standards in 1988.
Hospital Ownership and Technical Inefficiency
Authors: Burgess James F. , Wilson Paul W.
Published: November 2008

The theoretical industrial organization literature cites varying factors which might influence the degree of technical efficiency achieved under different ownership structures in the US hospital industry. Unfortunately, this literature offers no consensus regarding the net direction and magnitude of these various effects. This study analyzes the four types of ownership structure in the US hospital industry—private nonprofit, private for-profit, federal, and state and local government. Distance functions are used to measure technical efficiency of hospitals producing multiple outputs relative to other hospitals in the sample, allowing comparisons among the different ownership types.
The Nonstationary Stochastic Lead-Time Inventory Problem: Near-Myopic Bounds, Heuristics, and Testing
Authors: Anupindi Ravi , Morton Thomas E. , Pentico David
Published: November 2008

The purpose of the current paper is to combine the classical results of Kaplan (Kaplan, R. 1970. Dynamic inventory model with stochastic lead times. Management Sci. 16(2) 491–507.) and Ehrhardt (Ehrhardt, R. 1984. (s, S) Policies for a dynamic inventory model with stochastic lead times. Oper. Res. 32(1) 121–132.) for stochastic leadtime problems with recent work of Morton and Pentico (Morton, T., D. Pentico. 1995. The finite horizon nonstationary stochastic inventory problem near-myopic bounds, heuristics, testing. Management Sci. 41(2) 334–343.), which assumed zero lag, to obtain near-myopic bounds and heuristics for the nonstationary stochastic leadtime problem with arbitrary sequences of demand distributions, and to obtain planning horizon results. Four heuristics have been tested on a number of different demand scenarios over a number of random trials for four different leadtime distributions. The myopic (simplest) heuristic performs well only for moderately varying problems without heavy end of season salvaging, giving errors for this type of problem that are less than 1.5%. However, the average error for the myopic heuristic over all scenarios tested is 20.0%. The most accurate heuristic is the near-myopic heuristic which averages 0.5% form optimal across all leadtime distributions with a maximum error of 4.7%. The average error with increases in variance of the leadtime distribution.
A Psychological Approach to Decision Support Systems
Authors: Hoch Stephen J. , Schkade David A.
Published: November 2008

Rapid advances in information technology have brought decision makers the mixed blessing of an increasingly vast amount of easily available data. Designers of decision support systems (DSS) have focused on incorporating the latest technology with little attention to whether these new systems are compatible with the psychology of decision makers. Our premise is that DSS should be designed to take advantage of the distinctive competencies of decision makers while using technology to compensate for their inherent weaknesses. In this study we apply this approach to a forecasting task. We find that to arrive at a forecast decision makers often search their experience for a situation similar to the one at hand and then make small adjustments to this previous situation. Our theoretical model of the performance of this intuitively appealing strategy shows that it performs reasonably well in highly predictable environments, but performs quite poorly in less predictable environments. Results from an experiment confirm these predictions and show that providing decision makers with a simple linear model in combination with a computerized database of historical cases improves performance significantly. We conclude by discussing how these results can be used to help improve forecasting in applied contexts, such as promotion forecasting in the retail grocery industry.
Empirical Evaluation of the Revised Technology Acceptance Model
Authors: Szajna Bernadette
Published: November 2008

Davis et al. (Davis, F. D., R. P. Bagozzi, P. R. Warshaw. 1989. User acceptance of computer technology: A comparison of two theoretical models. Management Sci. 35(8) 982–1003.) proposed, tested, and revised the Technology Acceptance Model (TAM), which attempts to explain and predict why users sometimes accept and sometimes reject information systems (IS). The research reported here (1) provides a confirmatory, empirical test of the revised TAM and (2) introduces and objective measure of technology acceptance, actual usage rather than self-report usage. Subjects' beliefs about the usefulness and ease of use of an electronic mail system, their intentions to use the system, and their usage of it 15 weeks later were measured in a longitudinal study. The results confirmed that the TAM is a valuable tool for predicting intentions to use an IS. The findings here combined with results from other studies in this area suggest that the original TAM may be more appropriate than the two-version revised TAM. However, the addition of an experience component to the original TAM may be a significant enhancement. In addition, the results support that self-report usage may not be an appropriate surrogate measure for actual usage.
Inventory Control with Information About Supply Conditions
Authors: Song Jing-Sheng , Zipkin Paul H.
Published: November 2008

This paper presents an inventory-control model which includes a Markovian model of the supply system. As that system evolves over time, so do the replenishment leadtimes. The optimal policy has the same structure as in standard models, but its parameters change dynamically to reflect current supply conditions. In this setting, contrary to conventional wisdom, a longer leadtime does not necessarily imply more inventory. The leadtime is important, but so is a concept we call order coverage.
Maximum Entropy Aggregation of Expert Predictions
Authors: Myung In Jae , Ramamoorti Sridhar , Bailey Andrew D.
Published: November 2008

This paper presents a maximum entropy framework for the aggregation of expert opinions where the expert opinions concern the prediction of the outcome of an uncertain event. The event to be predicted and individual predictions rendered are assumed to be discrete random variables. A measure of expert competence is defined using a distance metric between the actual outcome of the event and each expert's predicted outcome. Following Levy and Delic (Levy, W. B., H. Delic. 1994. Maximum entropy aggregation of individual opinions. IEEE Trans. Sys. Man & Cybernetics 24 606–613.), we use Shannon's information measure (Shannon [Shannon, C. E. 1948. A mathematical theory of communication. Bell Syst. Tech. J. 27 379–423.], Jaynes [Jaynes, E. T. 1957. Information theory and statistical mechanics. Phys. Rev. 106 Part I: 620–630, 108 Part II: 171–190.]) to derive aggregation rules for combining two or more expert predictions into a single aggregated prediction that appropriately calibrates different degrees of expert competence and reflects any dependence that may exist among the expert predictions. The resulting maximum entropy aggregated prediction is least prejudiced in the sense that it utilizes all information available but remains maximally non committal with regard to information not available. Numerical examples to illuminate the implications of maximum entropy aggregation are also presented.
Bidding in Common Value Auctions: How the Commercial Construction Industry Corrects for the Winner's Curse
Authors: Dyer Douglas , Kagel John H.
Published: November 2008

Experienced construction industry executives suffer from a winner's curse in laboratory common value auction markets (Dyer et al. [Dyer, D., J. H. Kagel, D. Levin. 1989. A comparison of naive and experienced bidders in common value offer auctions: Laboratory analysis. Econom. J. 99 108–115.]). This paper identifies essential differences between field environments and the economic theory underlying the laboratory markets that account for the executives' success in the field and a winner's curse in the lab. These are (1) industry-specific mechanisms which enable contractors to escape the winner's curse even when they bid too low, (2) learned, industry-specific evaluative processes which enable experienced contractors to avoid the winner's curse in the first place, and (3) important private value elements that underlie bidding. Also identified are a number of industry-specific bidding characteristics whose evolution can be explained using modern auction theory. Lessons are drawn regarding the use of experimental methods in economics.
Decision Quality Using Ranked Attribute Weights
Authors: Barron F. Hutton , Barrett Bruce E.
Published: November 2008

Three published approximation formulae for selecting the best multiattribute alternative based on rank-ordered weights are evaluated. All formulae are surprisingly efficacious in determining the best multiattribute alternative. Rank order centroid (ROC) weights are more accurate than the other rank-based formulae; furthermore, the ROC formula generalizes to incorporate both other forms of partial information about attribute weights and partial rank order information as well. Because a ROC-based analysis is so straightforward and efficacious, it provides an appropriate implementation tool.
Parametric Solution for Linear Bicriteria Knapsack Models
Authors: Eben-Chaime Moshe
Published: November 2008

Linear weighing is a common approach to handle multiple criteria and the “knapsack” is a well-known combinatorial optimization problem. A knapsack problem with two linearly weighted, objective criteria is considered in this paper. For better support, it is important to provide the decision maker with information that covers the whole range of alternatives. Toward this goal, an algorithm for the construction of a parametric solution to the problem, i.e., for any combination of weights, is developed, which is based on finding a longest path in a network which compactly represents all feasible solutions to the knapsack problem. Exploiting the special structure of the knapsack model, the algorithm efficiently constructs the parametric solution in time that is linear in the product of the number of variables, the resource limit (right-hand side of the constraint), and the (finite) number of vectors which constitute the solution. The amount of memory required is linear in the product of the number of variables and the resource limit. Results of computational study are reported. The results are used to assess the efficiency of the algorithm and characterize its behavior with respect to the parameter values.
Verification of Uncertain Knowledge-Based Systems: An Empirical Verification Approach
Authors: O'Leary Daniel E.
Published: November 2008

A number of different tests and approaches are developed to determine the existence of potential anomalies in rule-based systems that employ MYCIN uncertainty factors (weights). First, the distribution of weights is compared to other systems' distributions and weights are investigated as to their individual meanings, to determine whether any weights are unusual. Second, there is increasing evidence that people are not “good” at developing weights on rules, building in symmetries and redundancies that signal “usual” assumptions about the underlying probabilities. Accordingly, weight symmetries generated from rule pairs are analyzed to determine the existence of anomalies. Third, typically rule-based tools have been developed for application in specific domains, such as medicine. Unique aspects of those domains may limit application of the tools to other domains. Finally, ad hoc, rule-based approaches are suboptimal, and alternative formal probability approaches, such as Bayes' nets, more fully specify the probabilistic nature of knowledge.

The paper is part of the empirical verification literature, where verification is done on an actual system and the system provides data that indicates the kinds of anomalies that can be expected. A case study is used to illustrate each of the verification tests and concerns.
Designs for Environmental Scanning Systems: Tests of a Contingency Theory
Authors: Yasai-Ardekani Masoud , Nystrom Paul C.
Published: November 2008

This study compared the relationships between organizational context and the designs of environmental scanning systems for organizational with effective and ineffective scanning systems. The study analyzed data from over 100 North American business organizations. Results indicate that organizations with effective scanning systems tend to align their scanning designs with the requirements of their context. On the other hand, the results show that organizations with ineffective scanning systems typically fail to exhibit the requisite level of alignment between contexts and scanning design.
Joint Cost Allocation for Multiple Lots
Authors: Balachandran Bala V. , Ramakrishnan Ram T. S.
Published: November 2008

We consider the joint cost allocation problem that arises when several lots or resources are available to serve different products or divisions. We provide a two-phase model, wherein the first phase the optimal set of lots to be acquired is chosen and given the optimal set, and the products using each acquired lot is also determined. In the second phase, a stable full cost allocation method is developed that will not induce the divisions to form coalitions to reduce the allocated joint costs. Utilizing the optimal dual solution of the lot selection phase, we provide a joint cost allocation mechanism based on the concept of propensity to contribute and show that this allocation is also stable. If in the first phase there is a dual gap, then we show that there is no cost allocation in the core. A numerical illustration is provided.
Some Results in the CAPM with Nontraded Endowments
Authors: Oh Gyutaeg
Published: November 2008

The paper establishes a positive security market line in the CAPM with nontraded endowments. The effects of a market structure change on the security market line are analyzed when the equilibrium allocation is affected by the change.
Reservation Planning for Elective Surgery Under Uncertain Demand for Emergency Surgery
Authors: Gerchak Yigal , Gupta Diwakar , Henig Mordechai
Published: November 2008

This work concerns the advance scheduling of elective surgery when the operating rooms' capacity utilization by emergency surgery, as well as by elective procedures, is uncertain. New requests for bookings of elective surgery arrive each day. Such procedures preferably would be performed as soon as possible, but admitting too many patients may result in exceeding a day's capacity, possibly necessitating turning away some emergency cases. So the problem facing the hospital at the start of each day is how many of the additional requests for elective surgery to assign for that day. We provide a stochastic dynamic programming model for this aggregate advance scheduling problem. The model has some novel mathematical features. We analyze it and characterize the nature of the optimal policy, which is not necessarily of a control-limit type. Plausible numerical examples which confirm our theoretical results and provide additional insights are reported.
Product Variety and Manufacturing Performance: Evidence from the International Automotive Assembly Plant Study
Authors: MacDuffie John Paul , Sethuraman Kannan , Fisher Marshall L.
Published: November 2008

This paper examines the effect of product variety on manufacturing performance, defined here as total labor productivity and consumer-perceived product quality. Using data from the International Motor Vehicle Program (M.I.T.) study of 70 assembly plants worldwide, the paper examines three dimensions of product variety, at fundamental, peripheral, and intermediate levels. The international sample reveals great variation in the distribution of each type of product variety in different regions, reflecting in part different strategies for variety. Furthermore, the impact of different kinds of product variety on performance varies, and is generally much less than the conventional manufacturing wisdom would predict. However, an intermediate type of product variety, here called parts complexity, was found to have a persistent negative impact on productivity. Finally, the study provides partial support for the hypothesis that management policies, in both operations and human resource areas, can facilitate the absorption of higher levels of product variety, i.e. that “lean production” plants are capable of handling higher levels of product variety with less adverse effect on total labor productivity than traditional “mass production” plants.
Innovation, Competitive Advantage and Rent: A Model and Test
Authors: McGrath Rita Gunther , Tsai Ming-Hone , Venkataraman S. , MacMillan I. C.
Published: November 2008

Four antecedents, it is argued, are necessary precursors for a firm to capture rents from innovation. The antecedents are causal understanding; innovation team proficiency; emergence and mobilization of new competences; and creation of competitive advantages, each of which are conceptually distinct and precisely defined in the paper. These constructs are linked together in a stage model and subsequently operationalized and tested using LISREL. Substantial support is found for the central thesis, that achieving each of the four antecedent processes increases the predicted rents from an innovation project.
Quality Awards and the Market Value of the Firm: An Empirical Investigation
Authors: Hendricks Kevin B. , Singhal Vinod R.
Published: November 2008

This paper empirically investigates the impact of winning a quality award on the market value of firms by estimating the mean “abnormal” change in the stock prices of a sample of firms on the date when information about winning a quality award was publicly announced. We note that the abnormal returns generated by the quality award winning announcements provide a lower bound for the impact of implementing an effective quality award improvement program. Our results show that the stock market reacts positively to quality award announcements. Statistically significant mean abnormal returns on the day of the announcements ranged from a low of 0.59% to a high of 0.67% depending on the model used to generate the abnormal returns. The reaction was particularly strong for smaller firms (mean abnormal returns ranged from low of 1.16% to a high of 1.26%), and for firms that won awards from independent organizations such as Malcolm Baldrige, Philip Crosby, etc. (mean abnormal returns ranged from a low of 1.31% to a high of 1.65%). Winning a quality award also conveys information about the systematic risk of the firm. We find a statistically significant decrease in the equity and the asset betas after the quality award announcement. There is also evidence to suggest that large firms experience negative stock price performance in the second year before winning quality awards, which is followed by a year of positive performance. Small firms experience a positive stock price performance in the second year before winning quality awards but no negative performance before winning quality awards.
Aggregation Error in Bayesian Analysis of Reliability Systems
Authors: Azaiez M. Naceur , Bier Vicki M.
Published: November 2008

Perfect aggregation in Bayesian system reliability analysis has been shown to be extremely unlikely. In other words, aggregation error is almost inevitable. Consequently, analysts have to deal with the following dilemma: on one hand, an aggregate analysis (i.e., an analysis at the system level), while relatively inexpensive, may be misleading. On the other hand, a disaggregate analysis (i.e., at the component level) provides more accurate results, but may be costly and impractical. Therefore, simple techniques to estimate the size of aggregation error are necessary to help analysts choose the most appropriate level of detail for an analysis. In this paper, reasonable bounds on the aggregation error are derived for a variety of reliability models. In particular, these bounds will never be more than twice the actual error. Tools to compute these bounds (and in some cases the actual error) are also provided.
Initial Data Truncation for Univariate Output of Discrete-Event Simulations Using the Kalman Filter
Authors: Gallagher Mark A. , Bauer Kenneth W. , Maybeck Peter S.
Published: November 2008

Data truncation is a commonly accepted method of dealing with initialization bias in discrete-event simulation. An algorithm for determining the appropriate initial-data truncation point for univariate output is proposed. The technique entails averaging across independent replications and estimating a steady-state output model in a state-space framework. A Bayesian technique called Multiple Model Adaptive Estimation (MMAE) is applied to compute a time varying estimate of the output's steady-state mean. This MMAE implementation features the use, in parallel, of a bank of three Kalman filters. Each filter is constructed under a different assumption about the output's steady-state mean. One of the filters assumes that the steady-state mean is accurately reflected by an estimate, called the “assumed steady-state mean,” taken from the last half of the simulation data. This filter is called the reference filter. The remaining filters are calibrated with steady-state means corresponding to simple functions of the minimum and maximum data values, respectively. As the filters process the output through the effective transient, the reference filter becomes more likely (in a Bayesian sense) to be the best filter to represent the data, and the MMAE mean estimator is influenced increasingly towards the assumed steady-state mean. The estimated truncation point is selected when the MMAE mean estimate is within a small tolerance of the assumed steady-state mean.

A Monte Carlo analysis using data generated from twelve simulation models is used to evaluate the technique. The evaluation criteria include the ability to estimate accurately and to construct reliable confidence intervals for the mean of the response based on the truncated sequences.
On the Advantage of Being the First Server
Authors: Hassin Refael
Published: November 2008

The following example illustrates the problem treated in this paper: Two gas stations are located one after the other on a main road. A driver who needs to fill his rank sees the queue situation at the first station but not at the second one. The driver estimates the expected waiting time at the first station, compares it to the conditional expected waiting time at the second one, and decides which station to enter. The second station is assumed to be on the driver's route so that no extra cost is involved in choosing it. Is it true that the first station always gets a higher share of the demand than the second one? We model the situation in terms of queueing theory and answer the question.
Budgets as Dynamic Gatekeepers
Authors: Pollack Harold , Zeckhauser Richard
Published: November 2008

Most large organizations allocate resources by means of fixed budgets: each subunit is normally entitled to spend a defined amount over a fixed period, usually one year. Fixed budgets create clear incentives for subunits to control costs. Yet such arrangements create major incentives for dynamic inefficiency, for example by encouraging subunits to exhaust their budgets toward the end of the fiscal year.

This paper develops a dynamic optimization model to examine the incentives fostered by budget systems. It invokes the metaphor of physicians involved in a health care delivery system to examine incentives created by decentralized “gatekeeping” as a mechanism to control medical costs. The paper also discusses some methods to reduce the incentives for dynamic inefficiency that fixed budgets create.
Biases in Retrospective Self-Reports of Time Use: An Empirical Study of Computer Users
Authors: Collopy Fred
Published: November 2008

Research on information systems (IS) use has often relied upon retrospective self-reports. One example is when the amount of time spent using a system is reported, often as an indication of user acceptance. In this study, self-assessments of computer usage are compared with computer-monitored interactive use and connect time for 401 managers and professionals. When self-assessed use was compared with logged interactive use, there was a 32% difference in the average amount of use (3.9 vs. 2.7 hours/day). When the self-assessment was compared with total connect time, the averages were similar to each other (3.9 vs. 4.0 hours). In both comparisons, though, there were considerable differences between individual self-assessments and logged time (with a median absolute percentage difference of 47% when compared with logged connect time). Individual estimates of use tended to regress toward the population's mean use. Those whose use of the system was relatively light overestimated their use, while heavy users underestimated theirs. When a test of the relationship between user satisfaction and amount of use was conducted using self-assessments, the relationship was not statistically significant. When the same test was conducted using logged connect time, the relationship was significant. These results suggest that care should be exercised in operationalizing the user acceptance construct through self-reports of time use.
Information Systems Planning: A Model and Empirical Tests
Authors: Hann Jim , Weber Ron
Published: November 2008

Empirical studies of information systems planning practices in organizations indicate that wide variations exist. We propose and test a model based on agency theory and transaction-costs economics to account for these variations. As senior management's uncertainty with respect to the information systems function increases, we argue they will delegate more decision rights to the information systems manager. As a result of increased agency costs, senior management will demand more information systems planning to provide the basis for monitoring and bonding of the manager. In addition, because information systems plans may be used to resolve the distribution of gains and losses between senior management and the information systems manager in the event of unforeseen circumstances, both senior management and the information systems manager will seek to exercise control over the planning process and the form of the final plan. We argue that the relative specialization of human capital of senior management versus the information systems manager will dictate whose views dominate in the preparation of and form of the information systems plan. Our empirical results show moderate support for our model.