bluuebunny/crossref_metadata_2025 huggingface dataset:
Software Development Practices, Software Complexity, and Software Maintenance Performance: A Field Study
Authors: Banker Rajiv D. , Davis Gordon B. , Slaughter Sandra A.
Published: November 2008

Software maintenance claims a large proportion of organizational resources. It is thought that many maintenance problems derive from inadequate software design and development practices. Poor design choices can result in complex software that is costly to support and difficult to change. However, it is difficult to assess the actual maintenance performance effects of software development practices because their impact is realized over the software life cycle. To estimate the impact of development activities in a more practical time frame, this research develops a two-stage model in which software complexity is a key intermediate variable that links design and development decisions to their downstream effects on software maintenance. The research analyzes data collected from a national mass merchandising retailer on 29 software enhancement projects and 23 software applications in a large IBM COBOL environment. Results indicate that the use of a code generator in development is associated with increased software complexity and software enhancement project effort. The use of packaged software is associated with decreased software complexity and software enhancement effort. These results suggest an important link between software development practices and maintenance performance.
Modeling Information Manufacturing Systems to Determine Information Product Quality
Authors: Ballou Donald , Wang Richard , Pazer Harold , Tayi Giri Kumar
Published: November 2008

Many of the concepts and procedures of product quality control can be applied to the problem of producing better quality information outputs. From this perspective, information outputs can be viewed as information products, and many information systems can be modeled as information manufacturing systems. The use of information products is becoming increasingly prevalent both within and across organizational boundaries.

This paper presents a set of ideas, concepts, models, and procedures appropriate to information manufacturing systems that can be used to determine the quality of information products delivered, or transferred, to information customers. These systems produce information products on a regular or as-requested basis. The model systematically tracks relevant attributes of the information product such as timeliness, accuracy and cost. This is facilitated through an information manufacturing analysis matrix that relates data units and various system components. Measures of these attributes can then be used to analyze potential improvements to the information manufacturing system under consideration.

An illustrative example is given to demonstrate the various features of the information manufacturing system and show how it can be used to analyze and improve the system. Following that is an actual application, which, although not as involved as the illustrative example, does demonstrate the applicability of the model and its associated concepts and procedures.
Estimating the Cost of Capital Through Time: An Analysis of the Sources of Error
Authors: Ferson Wayne E. , Locke Dennis H.
Published: November 2008

Practitioners needing estimates of a firm's equity cost of capital have long relied on the Capital Asset Pricing Model (CAPM). Recent evidence casts renewed doubt on the validity of the CAPM and beta. However, there is not much evidence to gauge the importance of the rejections of the CAPM in a practical decision-making context. This paper presents evidence on the sources of error in estimating required returns over time. We use a number of proxies for the true mean variance efficient portfolio, allowing that the CAPM is the “wrong” model. The analyst is assumed to rely on a standard market index. We find that the great majority of the error in estimating the cost of equity capital is found in the risk premium estimate, and relatively small errors are due to the risk measure, or beta. This suggests that analysts should improve estimation procedures for market risk premiums, which are commonly based on historical averages. This can be done by using regression models, such as have appeared in the recent finance literature, or by purchasing forecasts from firms that specialize in producing them.
Information Technology and Time-Based Competition in Financial Markets
Authors: Dewan Sanjeev , Mendelson Haim
Published: November 2008

This paper studies time-based competition in imperfect securities markets, linking IT investment decisions, information processing delays, and trading strategies. At the IT investment stage, traders trade off the cost of IT against their anticipated trading profits. At the trading stage, each trader devises a trading strategy based on his new information while taking into account the impact of both his own trades and those of other traders in the market. Our results illustrate how traders react to market imperfections due to trading costs and information processing delays, and how superior traders convert a timeliness advantage into higher trading profits. They also shed light on the relationship between the price adjustment process and traders' information processing delays. Timeliness imposes an interesting structure on trader competition: traders with longer information processing delays trade less frequently, submit smaller orders and enjoy lower profits per trade. Our analysis of traders' IT investment decisions demonstrates how factors such as IT costs, number of traders, and the frequency and nature of new information affect the level of IT investments. We further illustrate how improved IT infrastructure translates into competitive advantage.
Economics of Product Development by Users: The Impact of “Sticky” Local Information
Authors: von Hippel Eric
Published: November 2008

Those who solve more of a given type of problem tend to get better at it—which suggests that problems of any given type should be brought to specialists for a solution. However, in this paper we argue that agency-related costs and information transfer costs (“sticky” local information) will tend drive the locus of problem-solving in the opposite direction—away from problem-solving by specialist suppliers, and towards those who directly benefit from a solution and who have difficult-to-transfer local information about a particular application being solved, such as the direct users of a product or service. We examine the actual location of design activities in two fields in which custom products are produced by “mass-customization” methods: application-specific integrated circuits (ASICs) and computer telephony integration (CTI) systems. In both, we find that users rather than suppliers are the actual designers of the application-specific portion of the product types examined. We offer anecdotal evidence that the pattern of user-based customization we have documented in these two fields is in fact quite general, and we discuss implications for research and practice.
Discrete Lotsizing and Scheduling by Batch Sequencing
Authors: Jordan Carsten , Drexl Andreas
Published: November 2008

The discrete lotsizing and scheduling problem for one machine with sequence-dependent setup times and setup costs is solved as a single machine scheduling problem, which we term the batch sequencing problem. The relationship between the lotsizing problem and the batch sequencing problem is analyzed. The batch sequencing problem is solved with a branch & bound algorithm which is accelerated by bounding and dominance rules. The algorithm is compared with recently published procedures for solving variants of the DLSP and is found to be more efficient if the number of items is not large.
An Analysis of Product Lifetimes in a Technologically Dynamic Industry
Authors: Bayus Barry L.
Published: November 2008

The conventional wisdom that product lifetimes are shrinking has important implications for technology management and product planning. However, very limited empirical information on this topic is available. In this paper, product lifetimes are directly measured as the time between product introduction and withdrawal. Statistical analyses of desktop personal computer models introduced between 1974 and 1992 are conducted at various product market levels. Results indicate that (1) product technology and product model lifetimes have not accelerated, and (2) manufacturers have not systematically reduced the life-cycles of products within their lines. Instead, the products of firms that have entered this industry in the more recent years tend to be based on previously existing technology, and, not surprisingly, these products have lifetimes that are shorter than those of established firms. Implications of these findings are discussed.
Differences in Subjective Risk Thresholds: Worker Groups as an Example
Authors: Gaba Anil , Viscusi W. Kip
Published: November 2008

Subjective risk perceptions are often encoded as responses to 0-1 questions in surveys or other qualitative risk scales. However, reference points for assessing an activity as risky are confounded by various characteristics of the respondents. This paper uses a sample of workers for whom quantitative risk assessments as well as dichotomous risk perception responses are available. It is shown that, given a quantitative risk measure, the thresholds for assessing an activity as “risky” vary systematically, particularly by education. The differences in such thresholds across worker groups are estimated. The resulting implications of using qualitative risk variables for assessing wage-risk tradeoffs are estimated, yielding results that are also relevant for many other areas involving similar qualitative variables.
A Belief-Based Account of Decision Under Uncertainty
Authors: Fox Craig R. , Tversky Amos
Published: November 2008

We develop a belief-based account of decision under uncertainty. This model predicts decisions under uncertainty from (i) judgments of probability, which are assumed to satisfy support theory; and (ii) decisions under risk, which are assumed to satisfy prospect theory. In two experiments, subjects evaluated uncertain prospects and assessed the probability of the respective events. Study 1 involved the 1995 professional basketball playoffs; Study 2 involved the movement of economic indicators in a simulated economy. The results of both studies are consistent with the belief-based account, but violate the partition inequality implied by the classical theory of decision under uncertainty.
A Portfolio Approach to Risk Reduction in Discretely Rebalanced Option Hedges
Authors: Mello Antonio S. , Neuhaus Henrik J.
Published: November 2008

This paper analyses the accumulated hedging errors generated by discretely rebalanced option hedges. We show that simple generalizations of the prior research can underestimate the variance of the accumulated hedging errors and that even with daily rebalancing, these accumulated hedging errors can introduce substantial risk in arbitrage strategies suggested by the Black-Scholes option pricing model. We also show that the correlation between the accumulated hedging errors for different options can be quite high, so that the risk of arbitrage due to hedging errors can be substantially reduced by optimally combining options into portfolios. The results also suggest that tests of market pricing of traded options which are based on employing a portfolio approach are likely to be much better specified than the standard tests that focus on individual options.
Price Promotions and Trade Deals with Multiproduct Retailers
Authors: Lal Rajiv , Villas-Boas J. Miguel
Published: November 2008

In this paper we study retail price promotions and manufacturer trade deals in markets with multiproduct retailers. We find that in situations where retailers carry more than one competing brand, the promotions across brands can be positively or negatively correlated depending on the structure of the market: the relative sizes of the various market segments (in terms of loyalty to manufacturer, retailer, or the pair manufacturer-retailer). We show that sometimes retailers offer the same discount on different products, but at other times they offer a smaller discount on a brand supported by a bigger trade deal. We also present results on the effects of changes in the sizes of the different market segments on the depth of price promotions and trade deals and on pass through.
The Analysis of Assumptions in Model Bases Using Metagraphs
Authors: Basu Amit , Blanning Robert W.
Published: November 2008

Decision models are often based on certain assumptions as to their validity. Relevant assumptions may include value-based assumptions, such as limitations on the range or values of some input variables or exogenous factors, as well as assumptions about model structure (e.g., linearity). In a model base consisting of many models, there may be several models (or collections of models) that can be used to solve a particular problem. We may wish to know what the applicable models are, what assumptions are associated with these models, and whether a given set of assumptions is necessary and/or sufficient for solving the problem. We describe an analytical approach, based on a graph-theoretic construct called a metagraph, and show how it can be used to represent and analyze assumptions in model bases.
Investment Strategies for Flexible Resources
Authors: Van Mieghem Jan A.
Published: November 2008

This article studies optimal investment in flexible manufacturing capacity as a function of product prices (margins), investment costs and multivariate demand uncertainty. We consider a two-product firm that has the option to invest in product-dedicated resources and/or in a flexible resource that can produce either product, but has to make its investment decision before demands are observed. The flexible resource provides the firm with a hedge against demand uncertainty, but at a higher investment cost than the dedicated resources. Our analysis highlights the important role of price (margin) and cost mix differentials, which, in addition to the correlation between product demands, significantly affect the investment decision and the value of flexibility. Contrary to the intuition also prevalent in the academic literature, we show that it can be advantageous to invest in flexible resources even with perfectly positively correlated product demands.
Efficient Sourcing and Debt Financing in Imperfect Product Markets
Authors: Subramaniam Venkat
Published: November 2008

Supplier relations play an important role in determining a firm's product market strategy and position, by affecting the cost and quality of the product produced by the firm. These relations are especially significant because the cost of purchased materials for an average firm is more than half its total sales. In this paper, we model the adverse incentives of a firm that sources from a competitive supplier industry. We show that a firm's propensity to behave opportunistically towards its suppliers raises the firm's input costs by decreasing the number of suppliers servicing it. This results in a suboptimal production decision compared to the firm's first best choice. We argue that an appropriate level of debt financing alters the shareholder incentives and mitigates the hold-up problem. Further, we also show that at the optimal debt level, the firm produces its first best level of output.
Empirical Martingale Simulation for Asset Prices
Authors: Duan Jin-Chuan , Simonato Jean-Guy
Published: November 2008

This paper proposes a simple modification to the standard Monte Carlo simulation procedure for computing the prices of derivative securities. The modification imposes the martingale property on the simulated sample paths of the underlying asset price. This procedure is referred to as the empirical martingale simulation (EMS). The EMS ensures that the price estimated by simulation satisfies the rational option pricing bounds. The EMS yields a substantial error reduction for the price estimate and can be easily coupled with the standard variance reduction methods. Simulation studies are conducted for European and Asian call options using both the Black and Scholes and GARCH option pricing frameworks. The results indicate that the EMS yields substantial variance reduction particularly for in- and at-the-money or longer-maturity options. The option price estimate based on the EMS is found to exhibit a minor small-sample bias only in few occasions. An analysis of the trade-off between computing time and price accuracy reveals that the EMS dominates the conventional simulation methods.
Control Variates for Probability and Quantile Estimation
Authors: Hesterberg Timothy C. , Nelson Barry L.
Published: November 2008

In stochastic systems, quantiles indicate the level of system performance that can be delivered with a specified probability, while probabilities indicate the likelihood that a specified level of system performance can be achieved. We present new estimators for use in simulation experiments designed to estimate such quantiles or probabilities of system performance. All of the estimators exploit control variates to increase their precision, which is especially important when extreme quantiles (in the tails of the distribution of system performance) or extreme probabilities (near zero or one) are of interest. Control variates are auxiliary random variables with known properties—in this case, known quantiles—and a strong stochastic association with the performance measure of interest. Since transforming a control variate can increase its effectiveness, we propose both continuous and discrete approximations to the optimal (variance-minimizing) transformation for estimating probabilities, and then invert the probability estimators to obtain corresponding quantile estimators. We also propose a direct control-variate quantile estimator that is not based on inverting a probability estimator. An empirical study using queueing, inventory and project-planning examples shows that substantial reductions in mean squared error can be obtained when estimating the 0.9, 0.95, and 0.99 quantiles.
Finding Optimal Material Release Times Using Simulation-Based Optimization
Authors: Homem-de-Mello Tito , Shapiro Alexander , Spearman Mark L.
Published: November 2008

We present a method for setting release times for jobs with due dates in a stochastic production flow line for which the sequence of jobs has been determined. Unlike other approaches to this problem, ours considers a transient situation. Thus, the flow line will typically contain work in process (WIP), that is, jobs that have been previously released to the system.

Our goal is to develop a job release schedule that not only minimizes tardiness but also maximizes flexibility. The philosophy can be characterized as one that seeks to “release as late as possible, but no later!”

Our methodology is based on Monte Carlo simulation and consequent optimization by a method that became known as “stochastic counterpart” or “sample path” simulation-based optimization techniques. We use this method to minimize an expected value objective function that contains terms for tardiness and flow time “costs.” We include a discussion of how the cost parameters of this objective function can be obtained by considering a “characteristic curve” for the system. We also discuss means for obtaining sensitivity analysis with respect to due dates and service times distributions parameters. We conclude with a numerical example.
Endogeneity in Brand Choice Models
Authors: Villas-Boas J. Miguel , Winer Russell S.
Published: November 2008

Applications of random utility models to scanner data have been widely presented in marketing for the last 20 years. One particular problem with these applications is that they have ignored possible correlations between the independent variables in the deterministic component of utility (price, promotion, etc.) and the stochastic component or error term. In fact, marketing-mix variables, such as price, not only affect brand purchasing probabilities but are themselves endogenously set by marketing managers. This work tests whether these endogeneity problems are important enough to warrant consideration when estimating random utility models with scanner panel data. Our results show that not accounting for endogeneity may result in a substantial bias in the parameter estimates.
On the Relationship Between Inventory Costs and Variety Benefits in Retail Assortments
Authors: Ryzin Garrett van , Mahajan Siddharth
Published: November 2008

Consider a category of product variants distinguished by some attribute such as color or flavor. A retailer must construct an assortment for the category, i.e., select a subset variants to stock and determine purchase quantities for each offered variant. We analyze this problem using a multinomial logit model to describe the consumer choice process and a newsboy model to represent the retailer's inventory cost. We show that the optimal assortment has a simple structure and provide insights on how various factors affect the optimal level of assortment variety. We also develop a formal definition of the level of fashion in a category using the theory of majorization and examine its implications for category profits.
The Data-Correcting Algorithm for the Minimization of Supermodular Functions
Authors: Goldengorin Boris , Sierksma Gerard , Tijssen Gert A. , Tso Michael
Published: November 2008

The Data-Correcting (DC) Algorithm is a recursive branch-and-bound type algorithm, in which the data of a given problem instance are “heuristically corrected” at each branching in such a way that the new instance will be as close as possible to polynomially solvable and the result satisfies a prescribed accuracy (the difference between optimal and current solution). In this paper the DC algorithm is applied to determining exact or approximate global minima of supermodular functions. The working of the algorithm is illustrated by an instance of the Simple Plant Location (SPL) Problem. Computational results, obtained for the Quadratic Cost Partition Problem (QCP), show that the DC algorithm outperforms a branch-and-cut algorithm, not only for sparse graphs but also for nonsparse graphs (with density more than 40%), often with speeds 100 times faster.
Generating Pareto Solutions in a Two-Party Setting: Constraint Proposal Methods
Authors: Ehtamo Harri , Hämäläinen Raimo P. , Heiskanen Pirja , Teich Jeffrey , Verkama Markku , Zionts Stanley
Published: November 2008

This paper presents a class of methods, called constraint proposal methods, for generating Pareto-optimal solutions in two-party negotiations. In these methods joint tangents of the decision makers' value functions are searched by adjusting an artificial plane constraint. The problem of generating Pareto-optimal solutions decomposes into ordinary multiple criteria decision-making problems for the individual decision makers and into a coordination problem for an assisting mediator. Depending on the numerical iteration scheme used to solve the coordination problem, different constraint proposal methods are obtained. We analyze and illustrate the behaviour of some iteration schemes by numerical examples using both precise and imprecise answers from decision makers. An example of a method belonging to the class under study is the RAMONA method, that has been previously described from a practical point of view. We present the underlying theory for it by describing it as a constraint proposal method, and include some applications.
A Note on Asset Proportions, Stochastic Dominance, and the 50% Rule
Authors: Clark Ephraim , Jokung Octave
Published: November 2008

In this note we analyze the composition of an optimal portfolio by considering the cumulative conditional expected outcome of two dependent assets. We develop a conditional stochastic dominance relation and show that for any concave von Neumann-Morgenstern utility function, the proportion of wealth invested in the dominant asset will be greater than 50%.
New Firm Survival: Institutional Explanations for New Franchisor Mortality
Authors: Shane Scott , Foo Maw-Der
Published: November 2008

Why do some new firms succeed and others fail? Economists argue that new firms fail because entrepreneurs inefficiently manage production and organizational design (Williamson 1985). Sociologists (e.g., Granovetter 1985) have typically viewed this explanation as undersocialized, and argue that institutional legitimacy must also be considered to explain the survival of new firms. This paper examines the survival of 1292 new franchisors established in the United States from 1979–1996. The results show that institutional legitimacy adds to economic explanations for the survival of new franchisors and suggests the importance of a properly socialized explanation.
Lotsizing and Scheduling on Parallel Machines with Sequence-Dependent Setup Costs
Authors: Kang Sungmin , Malik Kavindra , Thomas L. Joseph
Published: November 2008

Industrial lotsizing and scheduling pose very difficult analytical problems. We propose an unconventional model that deals with sequence-dependent setup costs in a multiple-machine environment. The sequence-splitting model splits an entire schedule into subsequences, leading to tractable subproblems. An optimization approach based on a column generation/branch and bound methodology is developed, and heuristically adapted to test problems including five real-world problem instances gathered from industry.
Evaluating Financial Risk in the Medicare Prospective Payment System
Authors: Dada Maqbool , White William D.
Published: November 2008

The Medicare Prospective Payment System (PPS) is analogous to an insurance scheme in which financial risk is mitigated through experience rating. In addition, risk is also mitigated through reinsurance provisions. Although a provider may not want this reinsurance, participation is mandatory. We develop a framework for evaluating financial risk under the PPS. We use this framework to examine optional reinsurance as an alternative risk mitigation mechanism. We illustrate an application of optional reinsurance using data for Medicare psychiatric inpatient services. Our analysis indicates that viable schemes exist for implementing optional reinsurance as a prospective payment option.
A “Parallel Approach” Path to Estimating Collision Risk During Simultaneous Landings
Authors: Barnett Arnold
Published: November 2008

Airport capacity could increase if, even during inclement weather, independent landings could occur on parallel runways only about half a mile apart. A key question about such operations is whether the collision risk they entail is acceptably low. Pursuing that issue, we explore a method for estimating the chance that a plane on final approach during instrument flight conditions will “blunder” in a way that could imperil nearby aircraft. We argue that the method could yield an attractive combination of high estimation accuracy and relatively low cost.
Measuring the Effectiveness of Overlapping Development Activities
Authors: Terwiesch Christian , Loch Christoph H.
Published: November 2008

Overlapping development activities is widely used to reduce project completion times in product development. However, research on the applicability of the concept in different technological environments remains scarce. So far, very few industry-specific studies have statistically confirmed an accelerating effect of overlap. In the present article we statistically measure the effectiveness of overlapping development activities in reducing project completion time. Building on analytical research in operations management, we argue that this effectiveness differs with the organization's capability to resolve uncertainty early in the process. Projects benefit more from overlap if they are able to resolve uncertainty early. This contingency view to overlapping development activities is tested based on data from 140 completed development projects across several global electronics industries.
Project Scheduling Under Partially Renewable Resource Constraints
Authors: Böttcher Jan , Drexl Andreas , Kolisch Rainer , Salewski Frank
Published: November 2008

We consider a generalization of the classical resource constrained project scheduling problem. We introduce so-called partially renewable resources by assuming for each resource a capacity on subsets of periods. The concept of partially renewable resources is a fundamental tool in order to make, e.g., timetabling and shift scheduling aspects, amenable to project scheduling. In addition, partially renewable resources serve to model complicated labor regulations. Furthermore, they cover traditional renewable and nonrenewable resource constraints as special cases.

We consider makespan minimization as objective. For the exact solution of the problem we employ a basic enumeration scheme. In order to speed up convergence, we formulate bounds which take into account future resource consumption of partially renewable resources. Moreover, we generalize the serial scheduling scheme in order to get fast approximation methods.

A rigorous assessment of the procedures is provided by solving ProGen instances generated under a full factorial test design. Besides the well-known problem parameters we employ additionally three parameters which control the generation of partially renewable resources.
IDEA and AR-IDEA: Models for Dealing with Imprecise Data in DEA
Authors: Cooper William W. , Park Kyung Sam , Yu Gang
Published: November 2008

Data Envelopment Analysis (DEA) is a nonparametric approach to evaluating the relative efficiency of decision making units (DMUs) that use multiple inputs to produce multiple outputs. An assumption underlying DEA is that all the data assume the form of specific numerical values. In some applications, however, the data may be imprecise. For instance, some of the data may be known only within specified bounds, while other data may be known only in terms of ordinal relations. DEA with imprecise data or, more compactly, the Imprecise Data Envelopment Analysis (IDEA) method developed in this paper permits mixtures of imprecisely- and exactly-known data, which the IDEA models transform into ordinary linear programming forms. This is carried even further in the present paper to comprehend the now extensively employed Assurance Region (AR) concepts in which bounds are placed on the variables rather than the data. We refer to this approach as AR-IDEA, because it replaces conditions on the variables with transformations of the data and thus also aligns the developments we describe in this paper with what are known as cone-ratio envelopments in DEA. As a result, one unified approach, referred to as the AR-IDEA model, is achieved which includes not only imprecise data capabilities but also assurance region and cone-ratio envelopment concepts.
The Effects of Human Resource Management Systems on Economic Performance: An International Comparison of U.S. and Japanese Plants
Authors: Ichniowski Casey , Shaw Kathryn
Published: November 2008

This study uses personally collected data from 41 steel production lines to assess the effects of Japanese and U.S. human resource management (HRM) practices on worker productivity. The Japanese production lines employ a common system of HRM practices including: problem-solving teams, extensive orientation, training throughout employees' careers, extensive information sharing, rotation across jobs, employment security, and profit sharing. A majority of U.S. plants now have one or two features of this system of HRM practices, but only a minority have a comprehensive system of innovative work practices that parallels the full system of practices found among the Japanese manufacturers.

We find that the Japanese lines are significantly more productive than the U.S. lines. However, U.S. manufacturers that have adopted a full system of innovative HRM practices patterned after the Japanese system achieve levels of productivity and quality equal to the performance of the Japanese manufacturers. This study's evidence helps reconcile conflicting views about the effectiveness of adopting Japanese-style worker involvement schemes in the United States. United States manufacturers that have adopted a definition of employee participation that extends only to problem-solving teams or information sharing do not see large improvements in productivity. However, U.S. manufacturers that adopt a broader definition of participation that mimics the full Japanese HRM system see substantial performance gains.
A Simulated Annealing Algorithm with Constant Temperature for Discrete Stochastic Optimization
Authors: Alrefaei Mahmoud H. , Andradóttir Sigrún
Published: November 2008

We present a modification of the simulated annealing algorithm designed for solving discrete stochastic optimization problems. Like the original simulated annealing algorithm, our method has the hill climbing feature, so it can find global optimal solutions to discrete stochastic optimization problems with many local solutions. However, our method differs from the original simulated annealing algorithm in that it uses a constant (rather than decreasing) temperature. We consider two approaches for estimating the optimal solution. The first approach uses the number of visits the algorithm makes to the different states (divided by a normalizer) to estimate the optimal solution. The second approach uses the state that has the best average estimated objective function value as estimate of the optimal solution. We show that both variants of our method are guaranteed to converge almost surely to the set of global optimal solutions, and discuss how our work applies in the discrete deterministic optimization setting. We also show how both variants can be applied for solving discrete optimization problems when the objective function values are estimated using either transient or steady-state simulation. Finally, we include some encouraging numerical results documenting the behavior of the two variants of our algorithm when applied for solving two versions of a particular discrete stochastic optimization problem, and compare their performance with that of other variants of the simulated annealing algorithm designed for solving discrete stochastic optimization problems.
Remarks on: “Some Extensions of the Discrete Lotsizing and Scheduling Problem”
Authors: Webster Scott
Published: November 2008

Computational complexity results provide guideposts toward fruitful directions in algorithmic research and therefore play an important role in research on algorithm design. This note discusses complexity analysis in the context of lotsizing and scheduling problems. Such discussion is warranted for three reasons. First, research on problems that combine lotsizing and scheduling is growing rapidly. Second, these problems have the potential for requiring much less information to represent an instance than to represent a candidate solution. As a consequence, analysis may depend critically on subtle considerations relating to instance and solution size. Third, as we will see below, there is some evidence that the literature is unclear on this point.
What Price Fairness? A Bargaining Study
Authors: Zwick Rami , Chen Xiao-Ping
Published: November 2008

Our study concerns bargaining behavior in situations where one party is in a stronger position than the other. We investigate both the tradeoff the favored party makes between pursuing his strategic advantage and giving weight to other players' concern for fairness, and the tradeoff the disadvantaged player makes between pursuing a fair outcome from a disadvantaged position and the cost of that pursuit. In particular, we hypothesize that the degree to which strategically strong players attempt to exploit their strategic advantage depends on their potential costs for doing so. Similarly, the degree to which weak players persist in seeking “fairness” is also a function of how much it (potentially) costs them to do so.

Students negotiated in pairs over the division of $HK50 using a finite horizon, fixed-cost (per rejection) alternating offer rule. Each pair consisted of a high-cost and a low-cost bargainer. In accordance with the hypothesis, the willingness of the high-cost bargainers to demand fairness and to persist in their demands was a function of how much it cost them to do so, and the degree to which the low-cost bargainers attempted to exploit their strategic advantage depended on their own cost of rejection. We conclude that “fairness” has a price such that the higher its price, the lower the “demand” for it. This suggests that demands for fairness are subject to cost-benefit evaluation, are in this sense deliberate, and are well thought out.
Retrieving and Transferring Embodied Data: Implications for the Management of Interdependence Within Organizations
Authors: King Andrew
Published: November 2008

This research helps to link theories of sticky information with organizational design and governance. It suggests that information embodied in process material can allow downstream tasks to uncover information about upstream tasks. It shows that downstream operators can use this information to negotiate interdependence problems with upstream operators. Data presented in this article begin to uncover when such information retrieval and exchange occurs, and how managers can encourage it. Finally, the article discusses implications for theories of operational design and governance.
Elicitation and Context Effects in Judgments: Fixed Sum Versus Fixed Scale Frames
Authors: Doyle John R.
Published: November 2008

Two apparently similar methods for making numerical judgments about a set of objects (point allocation and direct rating) have been shown to yield different profiles of values (here, numerical judgments) attached to Ranks. Direct rating typically leads to a nearly linear relationship of Value with Rank. When using point allocation, people tend to produce a half U-shape of Value with Rank, evidenced by a positive quadratic term in Rank, which is not present for direct rating. We argue that point allocation imposes a fixed-sum frame on the judgment task. Furthermore, certain problems, such as allocating a budget, are intrinsically framed as fixed-sum. These problems also lead to quadratic curvature of numerical judgment with Rank. We discuss the implications of these effects, both in formal and informal contexts.
Decision Analysis by Augmented Probability Simulation
Authors: Bielza Concha , Müller Peter , Insua David Ríos
Published: November 2008

We provide a generic Monte Carlo method to find the alternative of maximum expected utility in a decision analysis. We define an artificial distribution on the product space of alternatives and states, and show that the optimal alternative is the mode of the implied marginal distribution on the alternatives. After drawing a sample from the artificial distribution, we may use exploratory data analysis tools to approximately identify the optimal alternative. We illustrate our method for some important types of influence diagrams.
Capacity Choice and Allocation: Strategic Behavior and Supply Chain Performance
Authors: Cachon Gérard P. , Lariviere Martin A.
Published: November 2008

We consider a simple supply chain in which a single supplier sells to several downstream retailers. The supplier has limited capacity, and retailers are privately informed of their optimal stocking levels. If retailer orders exceed available capacity, the supplier allocates capacity using a publicly known allocation mechanism, a mapping from retailer orders to capacity assignments. We show that a broad class of mechanisms are prone to manipulation: Retailers will order more than they need to gain a more favorable allocation. Another class of mechanisms induces the retailers to order exactly their needs, thereby revealing their private information. However, there does not exist a truth-inducing mechanism that maximizes total retailer profits.

We also consider the supplier's capacity choice. We show that a manipulable mechanism may lead the supplier to choose a higher level of capacity than she would under a truth-inducing mechanism. Nevertheless, her choice will appear excessively restrictive relative to the prevailing distribution of orders. Furthermore, switching to a truth-inducing mechanism can lower profits for the supplier, the supply chain, and even her retailers. Hence, truth-telling is not a universally desirable goal.
Sensitivity Analysis of Insurance Risk Models via Simulation
Authors: Asmussen Søren , Rubinstein Reuven Y.
Published: November 2008

We show how, from a single simulation run, to estimate the ruin probabilities and their sensitivities (derivatives) in a classic insurance risk model under various distributions of the number of claims and the claim size. Similar analysis is given for the tail probabilities of the accumulated claims during a fixed period. We perform sensitivity analysis with respect to both distributional and structural parameters of the underlying risk model. In the former case, we use the score function method and in the latter, a combination of the push-out method and the score function. We finally show how, from the same sample path, to derive a consistent estimator of the optimal solution in an optimization problem associated with excess-of-loss reinsurance.
Note: Rule-Based Forecasting vs. Damped-Trend Exponential Smoothing
Authors: Gardner Everette S.
Published: November 2008

This paper evaluates the ex ante performance of rule-based time series forecasting systems proposed in earlier research. The author shows that comparable performance can be obtained with a simpler alternative, a damped-trend version of exponential smoothing fitted to minimize the Mean-Absolute-Deviation (MAD) criterion. The results suggest that the performance of rule-based systems would be improved through this alternative and that time series forecasters should consider MAD fits in model development.
Customer Satisfaction for Financial Services: The Role of Products, Services, and Information Technology
Authors: Krishnan M. S. , Ramaswamy Venkatram , Meyer Mary C. , Damien Paul
Published: November 2008

In this paper, we study the drivers of customer satisfaction for financial services. We discuss a full Bayesian analysis based on data collected from customers of a leading financial services company. Our approach allows us to explicitly accommodate missing data and enables quantitative assessment of the impact of the drivers of satisfaction across the customer population. We find that satisfaction with product offerings is a primary driver of overall customer satisfaction. The quality of customer service with respect to financial statements and services provided through different channels of delivery, such as information technology enabled call centers and traditional branch offices, are also important in determining overall satisfaction. However, our analysis indicates that the impact of these service delivery factors may differ substantially across customer segments. In order to facilitate managerial action, we discuss how specific operational quality attributes for designing and delivering financial services can be leveraged to enhance satisfaction with product offerings and service delivery. Our approach and findings have significant implications for managing customer satisfaction in the financial services industry.
Innovations in Financial Services, Relationships, and Risk Sharing
Authors: Allen Franklin , Gale Douglas
Published: November 2008

Relationships between intermediaries and their customers have become increasingly important in recent years. This paper argues that the need for costly ex ante information acquisition and analysis is a major barrier to the participation of investors and firms in sophisticated markets. Long-term relationships between intermediaries and their customers, in which intermediaries provide implicit insurance to customers, can be an effective substitute for costly ex ante investigation. In this way, intermediaries allow firms and investors to reap the benefits of financial markets. Relationships are easiest to sustain when the ongoing benefits to both parties are high. As a result, competition may lower the benefits that can be obtained from relationships.
Toward More Clarity in Business Communications by Modern Logical Methods
Authors: Allen Layman E.
Published: November 2008

A systematically organized method of writing can improve an organization's communications. Such a systematic method of writing can be expressed in the technical notation of modern symbolic logic or in a modified form of ordinary English prose that can be easily understood by readers who have not had any training in modern logic. This method can provide both a means of detecting ambiguities and a means of simplifying complicated statements without changing their meaning. Once an ambiguity is detected a writer can cut that ambiguity out, or he can allow it to remain. He is not forced to delete ambiguity in the systematically organized method of writing suggested in this article. This method of writing is likely to be used by organizations if, and only if, its merits are fully understood.
Discussion: A Note on the Political Economy of Organization
Authors: Hertz David Bendel
Published: November 2008

Comments based on material originally prepared for the Seminar on Theory and Research in Modern Management. Cooperative Center for Educational Administration, Columbia University.
A Linear Programming Approach to the Chemical Equilibrium Problem
Authors: Dantzig George , Johnson Selmer , White Wayne
Published: November 2008

The well known chemical equilibrium problem is expressed in the form of minimizing the free energy of a mixture in order to compute the chemical composition at equilibrium.

By piece-wise linear approximations to the free energy function, the problem becomes a linear program which can be solved by a standard code on a computing machine. Successive approximations give any degree of accuracy.
The Theory of Search: Optimum Distribution of Search Effort
Authors: Charnes A. , Cooper W. W.
Published: November 2008

This paper will be concerned with formulating the optimum allocation of search effort as a problem in convex programming so that their solutions may be made amenable to treatment by the adjacent extreme point methods of linear programming. Attention will be concentrated on discrete (statistical) distributions because this class of cases admits of the easiest and most straight-forward treatment. A sketch will then be given of how extensions may also be effected to continuous distributions.
Some Experimental Games
Authors: Flood Merrill M.
Published: November 2008

This paper reports the results of six experiments and analyses performed to explore the applicability of the non-constant-sum case of the theories of von Neumann-Morgenstern, and others, to the actual behavior of people playing games or involved in bargaining situations. The paper suggests directions in which the theory of games might be modified and extended to improve its applicability and usefulness. A “split-the-difference principle” is suggested to augment the usual theory, so as to specify the exact amount of payments to be made in an ordinary two-person bargaining situation such as the sale of a used car. The application of this principle seems satisfactory in the experiments. One experiment suggests that, in a sequence of trials in the same game situation, people tend to start near an equilibrium point and then try to find a better equilibrium, if there is one. The experiments show examples of non-optimal behavior of the bargainers when the judgment necessary to estimate the relevant payoff is obscure. A fair division of five parcels of objects among five players when each player attaches different values to the parcels is outlined and computed, and the effect of coalitions is discussed.
Dynamic Version of the Economic Lot Size Model
Authors: Wagner Harvey M. , Whitin Thomson M.
Published: November 2008

A forward algorithm for a solution to the following dynamic version of the economic lot size model is given: allowing the possibility of demands for a single item, inventory holding charges, and setup costs to vary over N periods, we desire a minimum total cost inventory management scheme which satisfies known demand in every period. Disjoint planning horizons are shown to be possible which eliminate the necessity of having data for the full N periods.