bluuebunny/crossref_metadata_2025 huggingface dataset:
Balancing Search and Stability: Interdependencies Among Elements of Organizational Design
Authors: Rivkin Jan W. , Siggelkow Nicolaj
Published: December 2003

We examine how and why elements of organizational design depend on one another. An agent-based simulation allows us to model three design elements and two contextual variables that have rarely been analyzed jointly: a vertical hierarchy that reviews proposals from subordinates, an incentive system that rewards subordinates for departmental or firm-wide performance, the decomposition of an organization's many decisions into departments, the underlying pattern of interactions among decisions, and limits on the ability of managers to process information. Interdependencies arise among these features because of a basic, general tension. To be successful, an organization must broadly search for good sets of decisions, but it must also stabilize around good decisions once discovered. An effective organization balances search and stability. We identify sets of design elements that encourage broad search and others that promote stability. The adoption of elements that encourage broad search typically raises the marginal benefit of other elements that provide offsetting stability. Hence, the need to balance search and stability generates interdependencies among the design elements. We pay special attention to interdependencies that involve the vertical hierarchy. Our findings confirm many aspects of conventional wisdom about vertical hierarchies, but challenge or put boundary conditions on others. We place limits, for instance, on the received wisdom that firm-wide incentives and capable subordinates make top-level oversight less valuable. We also identify circumstances in which vertical hierarchies can lead to inferior long-term performance.
Learning–by–Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer?
Authors: Song Jaeyong , Almeida Paul , Wu Geraldine
Published: December 2003

To investigate the conditions under which learning-by-hiring (or the acquisition of knowledge through the hiring of experts from other firms) is more likely, we study the patenting activities of engineers who moved from United States (U.S.) firms to non-U.S. firms. Statistical findings from negative binomial regressions show that mobility is more likely to result in interfirm knowledge transfer when (1) the hiring firm is less path dependent, (2) the hired engineers possess technological expertise distant from that of the hiring firm, and (3) the hired engineers work in noncore technological areas in their new firm. In addition, the results support the idea that domestic mobility and international mobility are similarly conducive to learning-by-hiring. Thus, our paper suggests that learning-by-hiring can be useful when hired engineers are used for exploring technologically distant knowledge (rather than for reinforcing existing firm expertise) and also for extending the hiring firm's geographic reach.
Does Good Science Lead to Valuable Knowledge? Biotechnology Firms and the Evolutionary Logic of Citation Patterns
Authors: Gittelman Michelle , Kogut Bruce
Published: December 2003

This study looks at the United States biotechnology industry as a community of practice caught between two evolutionary logics by which valuable scientific knowledge and valuable innovations are selected. We analyze the publications and patents of 116 biotechnology firms during the period 1988–1995. In models that link scientific capabilities to patent citations, we show that scientific ideas are not simply inputs into inventions; important scientific ideas and influential patents follow different and conflicting selection logics. Publication, collaboration, and science intensity are associated with patented innovations; however, important scientific papers are negatively associated with high-impact innovations. These results point to conflicting logics between science and innovation, and scientists must contribute to both while inhabiting a single epistemic community. We identify individuals listed on patents and scientific papers and find they effectively integrate science with innovation, leading to more successful innovations. Our findings suggest that the role of the small, research-intensive firm is to create a repository of knowledge; to act as an organizational mechanism to combine the capabilities of versatile scientists within and outside the boundaries of the firm; and to manage the selection of scientific ideas to produce valuable technical innovations.
Interdependence and Adaptability: Organizational Learning and the Long–Term Effect of Integration
Authors: Sorenson Olav
Published: December 2003

A growing body of research documents the role that organizational learning plays in improving firm performance over time. To date, however, this literature has given limited attention to the effect that the internal structure of the firm can have on generating differences in these learning rates. This paper focuses on the degree to which interdependence—and in particular one structural characteristic that generates interdependence, vertical integration—affects organizational learning. Firms face a trade–off. In stable environments, vertically integrating severely limits the organization's ability to learn by doing because boundedly rational managers find the optimization of operations difficult when making highly interdependent choices. As the volatility of the environment increases though, integration can facilitate learning–by–doing by buffering activities within the firm from instability in the external environment. Thus, firms with a high degree of interdependence suffer less in these environments. Tests of these hypotheses on the growth and exit rates of computer workstation manufacturers support this thesis.
Who's Really Sharing? Effects of Social and Expert Status on Knowledge Exchange Within Groups
Authors: Thomas-Hunt Melissa C. , Ogden Tonya Y. , Neale Margaret A.
Published: December 2003

This study investigated the effects of social status and perceived expertise on the emphasis of unique and shared knowledge within functionally heterogeneous groups. While perceived expertise did not increase the individual's emphasis of their own unique knowledge, perceived experts were more likely than nonexperts to emphasize shared knowledge and other member's unique knowledge contributions. Additionally, socially isolated members participated more in discussions and emphasized more of their unique knowledge than did socially connected members. While unique knowledge contributions increased the positive perception of social isolates, similar unique knowledge contributions decreased the positive perception of socially connected members. Finally, socially connected group members gave greater attention to the unique knowledge contributions of the socially isolated member than to the contributions of their socially connected other, but more favorably evaluated members to whom they were more favorably connected than those to whom they were not. We discuss the implications of our findings for managing knowledge exchange within diverse groups.
The Halo Effect and Technology Licensing: The Influence of Institutional Prestige on the Licensing of University Inventions
Authors: Sine Wesley David , Shane Scott , Gregorio Dante Di
Published: December 2003

Sociologists and organizational theorists have long claimed that the processes of knowledge creation and distribution are fundamentally social. Following in this tradition, we explore the effect of institutional prestige on university technology licensing. Empirically, we examine the influence of university prestige on the annual rate of technology licensing by 102 universities from 1991–1998. We show that institutional prestige increases a university's licensing rate over and above the rate that is explained by the university's past licensing performance. Because licensing success positively impacts future invention production, we argue that institutional prestige leads to stratification in the creation and distribution of university-generated knowledge.
Multimarket Competition, Consumer Search, and the Organizational Structure of Multiunit Firms
Authors: Chang Myong-Hun , Harrington Joseph E.
Published: December 2003

This research explores how market competition influences a firm's optimal organizational structure. For this purpose, a computational model of competing multiunit firms is developed in which unit managers and corporate staff continually search for better practices, while consumers search among units to find a better match. Organizational structure impacts both the practices at the unit level and the extent of knowledge transfer. An increasing returns mechanism is identified, which results in the relative performance of the centralized form being greater when competition is more intense.
Managing Knowledge in Organizations: An Integrative Framework and Review of Emerging Themes
Authors: Argote Linda , McEvily Bill , Reagans Ray
Published: December 2003

In this concluding article to the Management Science special issue on “Managing Knowledge in Organizations: Creating, Retaining, and Transferring Knowledge,” we provide an integrative framework for organizing the literature on knowledge management. The framework has two dimensions. The knowledge management outcomes of knowledge creation, retention, and transfer are represented along one dimension. Properties of the context within which knowledge management occurs are represented on the other dimension. These properties, which affect knowledge management outcomes, can be organized according to whether they are properties of a unit (e.g., individual, group, organization) involved in knowledge management, properties of relationships between units or properties of the knowledge itself. The framework is used to identify where research findings about knowledge management converge and where gaps in our understanding exist. The article discusses mechanisms of knowledge management and how those mechanisms affect a unit's ability to create, retain and transfer knowledge. Emerging themes in the literature on knowledge management are identified. Directions for future research are suggested.
The Utilization of Competing Technologies Within the Firm: Evidence from Cardiac Procedures
Authors: Huckman Robert S.
Published: December 2003

This paper examines the role of technological status in determining the rates at which competing techniques are used within a firm. Consistent with prior studies, technological status is measured on the basis of an actor's prior contributions to the body of knowledge concerning a given technique. The empirical analysis considers two treatments for coronary artery disease (CAD), each of which is associated with a distinct professional group within a hospital. These two groups are often characterized as engaging in a “turf war” for patients. After controlling for several factors that might explain technological choice—the clinical severity of patients, the relative quality of the two procedures at a given facility, firm-level financial performance, and other firm-level characteristics—I find that the technological status of the group associated with each technique affects the relative rate at which it is used within a given hospital. Moreover, this effect is strongest for patients at the margin between the two techniques. These results suggest that viewing the choice between competing innovations as a single, firm-level decision may not always capture the true dynamics underlying such a situation.
Predicting the Equity Premium with Dividend Ratios
Authors: Goyal Amit , Welch Ivo
Published: December 2003

Our paper suggests a simple, recursive residuals (out-of-sample) graphical approach to evaluating the predictive power of popular equity premium and stock market time-series forecasting regressions. When applied, we find that dividend ratios should have been known to have no predictive ability even prior to the 1990s, and that any seeming ability even then was driven by only two years, 1973 and 1974. Our paper also documents changes in the time-series processes of the dividends themselves and shows that an increasing persistence of dividend-price ratio is largely responsible for the inability of dividend ratios to predict equity premia. Cochrane's (1997) accounting identity—that dividend ratios have to predict long-run dividend growth or stock returns—empirically holds only over horizons longer than 5–10 years. Over shorter horizons, dividend yields primarily forecast themselves.
Capturing the Risk-Pooling Effect Through Demand Reshape
Authors: Eynan Amit , Fouque Thierry
Published: December 2003

The risk-pooling effect has been documented to benefit inventory systems by reducing the need for safety stock and consequently lowering costs such as inventory holding and shortage penalty. In this paper, we propose a new approach, called “demand reshape,” to take advantage of the risk-pooling effect. It is demonstrated that a company can improve its profit by encouraging some of its customers, who intended to purchase one product to switch to another. The effectiveness of this approach is evaluated in various scenarios and found to be very promising.
Problem–Solving Oscillations in Complex Engineering Projects
Authors: Mihm Jürgen , Loch Christoph , Huchzermeier Arnd
Published: December 2003

Coordination among many interdependent actors in complex product development projects is recognized as a key activity in organizational theory. It is well known that this coordination becomes progressively more difficult with project size, but we do not yet sufficiently understand whether this effect can be controlled with frequent and rich communication among project members, or whether it is inevitable. Recent work in complexity theory suggests that a project might form a “rugged landscape,” for which performance deterioration with system size is inevitable.

This paper builds a mathematical model of a complex design project that is divided into components (subproblems) and integrated back to the system. The model explicitly represents local component decisions, as well as component interactions in determining system performance. The model shows, first, how a rugged performance landscape arises even from simple components with simple performance functions, if the components are interdependent.

Second, we characterize the dynamic behavior of the system analytically and with simulations. We show under which circumstances it exhibits performance oscillations or divergence to design solutions with low performance. Third, we derive classes of managerial actions available to improve performance dynamics, such as modularization, immediate communication, and exchanging preliminary information. Some of these have not yet received adequate attention in literature and practice.
Investment Implications of Information Acquisition and Leakage
Authors: Dye Ronald A. , Sridhar Sri S.
Published: December 2003

This paper studies when a firm will acquire additional information about a potential new project by consulting outsiders, when doing so runs the risk of reducing the value of implementing the project as a consequence of information leakage. The analysis evaluates the firm's information acquisition activities in both the presence and absence of moral hazard in project production.
Quality Improvement and Infrastructure Activity Costs in Software Development: A Longitudinal Analysis
Authors: Harter Donald E. , Slaughter Sandra A.
Published: December 2003

This study draws upon theories of task interdependence and organizational inertia to analyze the effect of quality improvement on infrastructure activity costs in software development. Although increasing evidence indicates that quality improvement reduces software development costs, the impact on infrastructure activities is not known. Infrastructure activities include services like computer operations, data integration, and configuration management that support software development. Because infrastructure costs represent a substantial portion of firms' information technology budgets, it is important to identify innovations that yield significant cost savings in infrastructure activities. We evaluate quality and cost data collected in nine infrastructure activity centers over 10 years of product development in a major software firm undergoing a quality transformation. Findings indicate that infrastructure activities do benefit from quality improvement. The greatest marginal cost savings are realized in infrastructure activities that are highly interdependent with development and that occur later in the software development life cycle. Organizational inertia influences the rapidity with which the infrastructure activities benefit from higher product quality, especially for the more specialized activities. Finally, our findings suggest that although the savings in infrastructure from quality improvement are substantial, there are diminishing returns to quality improvement in infrastructure activities.
When Private Beliefs Shape Collective Reality: The Effects of Beliefs About Coworkers on Group Discussion and Performance
Authors: Kim Peter H.
Published: December 2003

The study presented in this paper examines how beliefs about coworkers affect group discussion and performance. Two beliefs are considered: (1) Perceptions of coworker task competence, and (2) achievement motivation. This study investigates whether these perceptions can actually hinder group discussion and performance, and considers the contexts in which these detrimental effects are more or less likely to arise. Results indicate that although perceptions of higher achievement motivation in coworkers lowered performance when task information was partially shared, they raised performance when task information was fully shared. A content analysis of group discussions reveals that the discussion behaviors examined by this study, rather than the more frequently examined bias toward discussing common information, mediated these results.
Conceptualizing and Measuring Variety in the Execution of Organizational Work Processes
Authors: Pentland Brian T.
Published: December 2003

Variability in organizational work processes is believed to influence productivity, quality, flexibility, and a host of other aspects of organizational design and management, but this construct has never been clearly conceptualized and measured. This paper introduces the concept of sequential variety, which accounts for variability in the sequence of events or actions that make up a process. This paper also proposes and compares three measures of sequential variety in organizational processes: Average distance (based on optimal string matching), algorithmic complexity, and deviation from uniform, random Markov. These measures are compared and validated using a simulated data set that embodies the range of variation likely to be encountered in empirical studies. All three measures correlate well and provide useful indicators of sequential variety, but the measures based on optimal string matching and deviation from the uniform, random Markov seem likely to be more useful in various potential applications.
Inferring Infection Transmission Parameters That Influence Water Treatment Decisions
Authors: Chick Stephen E. , Soorapanth Sada , Koopman James S.
Published: December 2003

One charge of the United States Environmental Protection Agency is to study the risk of infection for microbial agents that can be disseminated through drinking water systems, and to recommend water treatment policy to counter that risk. Recently proposed dynamical system models quantify indirect risks due to secondary transmission, in addition to primary infection risk from the water supply considered by standard assessments. Unfortunately, key parameters that influence water treatment policy are unknown, in part because of lack of data and effective inference methods. This paper develops inference methods for those parameters by using stochastic process models to better incorporate infection dynamics into the inference process. Our use of endemic data provides an alternative to waiting for, identifying, and measuring an outbreak. Data both from simulations and from New York City illustrate the approach.
Solving the Convex Cost Integer Dual Network Flow Problem
Authors: Ahuja Ravindra K. , Hochbaum Dorit S. , Orlin James B.
Published: December 2003

In this paper1, we consider an integer convex optimization problem where the objective function is the sum of separable convex functions (that is, of the form ∑(i,j)ϵQF̄ij(wij) + ∑iϵPB̄i(μi)), the constraints are similar to those arising in the dual of a minimum cost flow problem (that is, of the form μi− μj≤ wij, (i,j)∈Q), with lower and upper bounds on variables. Letn= |P|,m= |Q| , andUbe the largest magnitude in the lower and upper bounds of variables. We call this problemthe convex cost integer dual network flow problem. In this paper, we describe several applications of the convex cost integer dual network flow problem arising in a dial-a-ride transit problem, inverse spanning tree problem, project management, and regression analysis. We develop network flow-based algorithms to solve the convex cost integer dual network flow problem. We show that using the Lagrangian relaxation technique, the convex cost integer dual network flow problem can be transformed into a convex cost primal network flow problem where each cost function is a piecewise linear convex function with integer slopes. Its special structure allows the convex cost primal network flow problem to be solved inO(nmlog(n 2/m)log(nU)time. This time bound is the same time needed to solve the minimum cost flow problem using the cost-scaling algorithm, and is also is best available time bound to solve the convex cost integer dual network flow problem.
Term Structure of Interest Rates and Implied Market Frictions: The Min–Max Approach
Authors: Ioffe Ioulia D. , Prisman Eliezer Z.
Published: December 2003

It is often assumed that financial markets are frictionless. Bond markets are illiquid and bond prices are observed with errors. The magnitude of these errors leads to violation of no–arbitrage conditions and, consequently, prevents researchers from obtaining an estimate of the term structure (TS) of interest rates. Researchers have had to settle for a second–best estimate of the TS (e.g., obtained via regression) at a cost of an economically unrealistic assumption of symmetric market frictions. The true shape of market frictions, however, is not known and generally is a highly complex issue. A no–arbitrage–based methodology that avoids making detrimental assumptions is developed here. It facilitates empirical investigation of the shape of the market frictions and of the TS that are simultaneously imputed from market data assuming “efficient” market frictions that minimize the maximum net arbitrage. The empirical investigation performed in the Canadian and U.S. markets shows that in both markets the frictions are asymmetric and the estimates of the TS produced via regression and our methodology significantly differ.
You are Known by the Directors You Keep: Reputable Directors as a Signaling Mechanism for Young Firms
Authors: Deutsch Yuval , Ross Thomas W.
Published: December 2003

In this paper, we develop an analytical model of outside directors' signaling role—a role that is especially important for entrepreneurial firms. We formally demonstrate that in the face of a market failure in which stakeholders refuse to align themselves with new firms, high-quality new ventures may be able to credibly signal their type by appointing reputable directors to their boards. However, this option is not universally feasible. Both directors' reputations and the quality of their information determine the effectiveness of this strategy. In contrast to earlier adverse selection models, we demonstrate that when the middlemen (directors) have incomplete information on firm quality, bad and good firms can coexist in equilibrium. In this equilibrium, the quality of the directors' information determines the mix of good and bad firms in the population of surviving firms. Avenues for future research and normative implications for practitioners are discussed.
A Postponement Model for Demand Management
Authors: Iyer Ananth V. , Deshpande Vinayak , Wu Zhengping
Published: December 2003

In this paper, we analyze demand postponement as a strategy to handle potential demand surges. Under demand postponement, a fraction of the demands from the “regular” period are postponed and satisfied during a “postponement” period. This permits capacity to be procured to satisfy the postponed demands. A reimbursement per unit is paid to customers whose demands are postponed. The basic idea is that by preempting stockouts through demand postponement, we can reduce overall stockout costs. We formulate and solve a two-stage capacity planning problem under demand postponement. We propose a power range class of distributions to capture the nature of demand surges. We establish the scalability and conjugate properties of the power range distributions under demand postponement, which leads to a tractable analysis of the problem. We analytically solve the problem of determining the optimal regular and postponement period capacities, and the demand splitting rule to minimize the supplier's expected cost. We show that (a) the value of postponement may be significant depending on cost and demand parameters, (b) a postponement strategy may lead to reduced investment in initial capacity, and (c) it may be optimal to do no demand postponement over a range of demands even after observing a higher demand signal. We then relax several model assumptions and provide results for these extensions. We conclude with managerial insights.
Price and Delivery Logistics Competition in a Supply Chain
Authors: Ha Albert Y. , Li Lode , Ng Shu-Ming
Published: December 2003

We consider a supply chain in which two suppliers compete for supply to a customer. Pricing and delivery-frequency decisions in the system are analyzed by two three-stage noncooperative games with different decision rights designated to the parties involved. The customer first sets the price (or delivery frequency) for each supplier. Then, the suppliers offer the delivery frequencies (or prices) simultaneously and independently. Finally, the customer determines how much demand to allocate to each of the suppliers. We show that delivery frequency, similar to delivery speed in time-based competition, can be a source of competitive advantage. It also allows firms that sell identical products to offer complementary services to the customer because she can lower her inventory with deliveries from more suppliers. In general, higher delivery frequencies lower the value of getting deliveries from the second supplier and therefore intensify price competition. Assuming the cost structures do not change and the suppliers are identical, we show that when the customer controls deliveries, she would strategically increase delivery frequencies to lower prices. The distortion in delivery frequencies is larger and the overall performance of the supply chain is lower when the customer, not the suppliers, controls deliveries. Moreover, the customer is better off under delivery competition, while the suppliers are better off under price competition.
Robust Pricing of the American Put Option: A Note on Richardson Extrapolation and the Early Exercise Premium
Authors: Ibáñez Alfredo
Published: December 2003

This paper presents a detailed analysis of the numerical implementation of the American put option decomposition into an equivalent European option plus an early exercise premium (Kim 1990, Jacka 1991, Carr et al. 1992). It subsequently introduces a new algorithm based upon this decomposition and Richardson extrapolation. This new algorithm is based upon (a) the derivation of the correct order for the error term when applying Richardson extrapolation, which is used to control the error of the extrapolated prices, (b) an innovative adjustment of Kim's (1990) discrete-time early exercise premium, so that these premiums monotonically converge and, therefore, it is appropriate to use them in extrapolation, and (c) the optimal exercise frontier can be quickly computed through Newton's method, permitting the efficient implementation of the decomposition formula in practice. Numerical experiments show that this new algorithm is accurate, efficient, easy to implement, and competitive in comparison with other methods. Finally, it can also be applied to other American exotic securities.
Virtual Progress: The Effect of Path Characteristics on Perceptions of Progress and Choice
Authors: Soman Dilip , Shi Mengze
Published: December 2003

In goal–oriented services, consumers want to get transported from one well–defined state (start) to another (destination) state without much concern for intermediate states. A cost–based evaluation of such services should depend on the total cost associated with the service—i.e., the price and the amount of time taken for completion. In this paper, we demonstrate that the characteristics of the path to the final destination also influence evaluation and choice. Specifically, we show that segments of idle time and travel away from the final destination are seen as obstacles in the progress towards the destination, and hence lower the choice likelihood of the path. Further, we show that the earlier such obstacles occur during the service, the lower is the choice likelihood. We present an analytical model of consumer choice and test its predictions in a series of experiments. Our results show that in choosing between two services that cover the same displacement in the same time (i.e., identical average progress), consumer choice is driven by the perception of progress towards the goal (i.e., by virtual progress). In a final experiment, we show that the effects of virtual progress may outweigh the effects of actual average progress.
Mathematical Programs with Complementarity Constraints: Stationarity, Optimality, and Sensitivity
Authors: Scheel Holger , Scholtes Stefan
Published: December 2003

We study mathematical programs with complementarity constraints. Several stationarity concepts, based on a piecewise smooth formulation, are presented and compared. The concepts are related to stationarity conditions for certain smooth programs as well as to stationarity concepts for a nonsmooth exact penalty function. Further, we present Fiacco-McCormick type second order optimality conditions and an extension of the stability results of Robinson and Kojima to mathematical programs with complementarity constraints.
Probability Bounds with Cherry Trees
Authors: Bukszár József , Prékopa András
Published: December 2003

A third order upper bound is presented on the probability of the union of a finite number of events, by means of graphs called cherry trees. These are graphs that we construct recursively in such a way that every time we pick a new vertex, connect it with two already existing vertices. If the latters are always adjacent, we call the cherry tree a t-cherry tree. A cherry tree has a weight that provides us with the upper bound on the union. Any Hunter-Worsley bound can be majorized by a t-cherry bound constructed by the use of the Hunter-Worsley tree. A cherry tree bound can be identified as a feasible solution to the dual of the Boolean probability bounding problem. A t-cherry tree bound can be identified as the objective function value of the dual vector corresponding to a dual feasible basis in the Boolean problem. This enables us to improve on the bound algorithmically, if we use the dual method of linear programming.
Option Pricing with a General Marked Point Process
Authors: Prigent Jean-Luc
Published: December 2003

This paper examines the impact of a random number of price changes on the options valuation. The model introduces the structure of the general marked point processes (MPP). This kind of model allows us to take account of more general distributions of interarrival times than usual jump-diffusion models. In particular, stock price variations can be correlated with the times of transactions. Thus, the investors can decide to trade according to the history of market values and the sizes of price variations can also depend on the past times of transactions. By using the special decomposition of predictable processes, with respect to a marked point process, the determination of all risk-neutral probabilities is detailed. Derivative prices are calculated in this context with different basic examples.
On the Value of Some Infinite Matrix Games
Authors: Méndez-Naya Luciano
Published: December 2003

It is shown that a zero-sum two-person noncooperative game A defined by a bounded infinite matrix in which each row converges to the same real number β and each column to the same real number α has a value V(A) if and only if α ≤ β, in which case α ≤ V(A) ≤ β. For any game defined by a bounded infinite matrix A = (aij), a necessary condition for V(A) to exist is that infj lim infi aij ≤ supi lim supj aij.
On Polyhedral Approximations of the Second-Order Cone
Authors: Ben-Tal Aharon , Nemirovski Arkadi
Published: December 2003

We demonstrate that a conic quadratic problem, [Formula: see text] is “polynomially reducible” to Linear Programming. We demonstrate this by constructing, for every ϵ ∈ (0, ½], an LP program (explicitly given in terms of ϵ and the data of (CQP)) [Formula: see text] with the following properties: the number dim x + dim u of variables and the number dim p of constraints in (LP) do not exceed [Formula: see text] every feasible solution x to (CQP) can be extended to a feasible solution (x, u) to (LP); if (x, u) is feasible for (LP), then x satisfies the “ϵ-relaxed” constraints of (CQP), namely, [Formula: see text]
Random LSC Functions: An Ergodic Theorem
Authors: Korf Lisa A. , Wets Roger J.-B.
Published: December 2003

An ergodic theorem for random lsc (lower semicontinuous) functions is obtained by relying on a “scalarization” of such functions. In the process, Kolmogorov's extension theorem for random lsc functions is established. Applications to statistical estimation problems, composite materials, and stochastic optimization problems are briefly noted.
Tail Asymptotics for the Busy Period in the GI/G/1 Queue
Authors: Zwart A. P.
Published: December 2003

We characterise the tail behaviour of the busy period distribution in the GI/G/1 queue under the assumption that the tail of the service time distribution is of intermediate regular variation. This extends a result of de Meyer and Teugels (de Meyer and Teugels 1980), who treated the M/G/1 queue with a regularly varying service time distribution. Our method of proof is, opposed to the one in de Meyer and Teugels (1980), probabilistic, and reveals an insightful relationship between the busy period and the cycle maximum.
Complexity Analysis of Successive Convex Relaxation Methods for Nonconvex Sets
Authors: Kojima Masakazu , Takeda Akiko
Published: December 2003

This paper discusses computational complexity of conceptual successive convex relaxation methods proposed by Kojima and Tunçel for approximating a convex relaxation of a compact subset F = {x ∈ C0 : p(x) ≤ 0 (∀p(·) ∈ 𝒫F)} of the n-dimensional Euclidean space Rn. Here, C0 denotes a nonempty compact convex subset of Rn, and 𝒫F a set of finitely or infinitely many quadratic functions. We evaluate the number of iterations which the successive convex relaxation methods require to attain a convex relaxation of F with a given accuracy ε, in terms of ε, the diameter of C0, the diameter of F, and some other quantities characterizing the Lipschitz continuity, the nonlinearity, and the nonconvexity of the set 𝒫F of quadratic functions.
Associative and Jordan Algebras, and Polynomial Time Interior-Point Algorithms for Symmetric Cones
Authors: Schmieta S. H. , Alizadeh F.
Published: December 2003

We present a general framework whereby analysis of interior-point algorithms for semidefinite programming can be extended verbatim to optimization problems over all classes of symmetric cones derivable from associative algebras. In particular, such analyses are extendible to the cone of positive semidefinite Hermitian matrices with complex and quaternion entries, and to the Lorentz cone. We prove the case of the Lorentz cone by using the embedding of its associated Jordan algebra in the Clifford algebra. As an example of such extensions we take Monterio's polynomial-time complexity analysis of the family of similarly scaled directions—introduced by Monteiro and Zhang (1998)—and generalize it to cone-LP over all representable symmetric cones.
Stochastic Comparison of Random Vectors with a Common Copula
Authors: Müller Alfred , Scarsini Marco
Published: December 2003

We consider two random vectors X and Y, such that the components of X are dominated in the convex order by the corresponding components of Y. We want to find conditions under which this implies that any positive linear combination of the components of X is dominated in the convex order by the same positive linear combination of the components of Y. This problem has a motivation in the comparison of portfolios in terms of risk. The conditions for the above dominance will concern the dependence structure of the two random vectors X and Y, namely, the two random vectors will have a common copula and will be conditionally increasing. This new concept of dependence is strictly related to the idea of conditionally increasing in sequence, but, in addition, it is invariant under permutation. We will actually prove that, under the above conditions, X will be dominated by Y in the directionally convex order, which yields as a corollary the dominance for positive linear combinations. This result will be applied to a portfolio optimization problem.
Robust Portfolio Selection Problems
Authors: Goldfarb D. , Iyengar G.
Published: December 2003

In this paper we show how to formulate and solve robust portfolio selection problems. The objective of these robust formulations is to systematically combat the sensitivity of the optimal portfolio to statistical and modeling errors in the estimates of the relevant market parameters. We introduce “uncertainty structures” for the market parameters and show that the robust portfolio selection problems corresponding to these uncertainty structures can be reformulated as secondorder cone programs and, therefore, the computational effort required to solve them is comparable to that required for solving convex quadratic programs. Moreover, we show that these uncertainty structures correspond to confidence regions associated with the statistical procedures employed to estimate the market parameters. Finally, we demonstrate a simple recipe for efficiently computing robust portfolios given raw market data and a desired level of confidence.
Calibration with Many Checking Rules
Authors: Sandroni Alvaro , Smorodinsky Rann , Vohra Rakesh V.
Published: December 2003

Each period an outcome (out of finitely many possibilities) is observed. For simplicity assume two possible outcomes, a and b. Each period, a forecaster announces the probability of a occurring next period based on the past.

Consider an arbitrary subsequence of periods (e.g., odd periods, even periods, all periods in which b is observed, etc.). Given an integer n, divide any such subsequence into associated subsubsequences in which the forecast for a is between [i /n, i+1/n), i ∈ {0, 1, …, n}.

We compare the forecasts and the outcomes (realized next period) separately in each of these subsubsequences. Given any countable partition of [0,1] and any countable collection of subsequences, we construct a forecasting scheme such that for all infinite strings of data, the long-run average forecast for a matches the long-run frequency of realized a's.

A good Christian must beware of mathematicians and those soothsayers who make predictions by unholy methods, especially when their predictions come true, lest they ensnare the soul through association with demons. St. Augustine, De genesis ad litteram, Book II.
A Separation Algorithm for b-Matching Degree-Sequence Polyhedra
Authors: Zhang Fan
Published: December 2003

A b-matching of a graph is an assignment of non-negative integers to edges such that the sum at each node is at most a given bound. Its degree sequence is the vector whose components are the sums at each node. A linear-inequality description for the convex hull of degree sequences of b-matchings of a graph was found by Cunningham and Green-Krótki. This paper presents a polynomial-time combinatorial algorithm that either certifies a given vector as a member of the polyhedron or finds a valid inequality that is violated by the vector.
An Infinite-Dimensional LP Duality Theorem
Authors: Clark Stephen A.
Published: December 2003

This paper constructs an infinite-dimensional version of the Duality Theorem for a Linear Program (LP). The algebraic dual LP is replaced with a new program called the topological dual LP that closes the range of the adjoint operator. Under some mild nondegeneracy conditions involving strict positivity, the new Duality Theorem asserts that the optimal value of the primal LP equals the optimal value of the topological dual LP. Some applications to mathematical finance are also included.
On Cones of Nonnegative Quadratic Functions
Authors: Sturm Jos F. , Zhang Shuzhong
Published: December 2003

We derive linear matrix inequality (LMI) characterizations and dual decomposition algorithms for certain matrix cones which are generated by a given set using generalized co-positivity. These matrix cones are in fact cones of nonconvex quadratic functions that are nonnegative on a certain domain. As a domain, we consider for instance the intersection of a (upper) level-set of a quadratic function and a half-plane. Consequently, we arrive at a generalization of Yakubovich's S-procedure result. Although the primary concern of this paper is to characterize the matrix cones by LMIs, we show, as an application of our results, that optimizing a general quadratic function over the intersection of an ellipsoid and a half-plane can be formulated as semidefinite programming (SDP), thus proving the polynomiality of this class of optimization problems, which arise, e.g., from the application of the trust region method for nonlinear programming. Other applications are in control theory and robust optimization.
Preference Foundations for Nonexpected Utility: A Generalized and Simplified Technique
Authors: Köbberling Veronika , Wakker Peter P.
Published: December 2003

This paper examines a tradeoff-consistency technique for testing and axiomatically founding decision models. The technique modifies earlier tradeoff-consistency techniques by only considering indifferences, not strict preferences. The resulting foundations are both more general and more accessible than earlier results, and they are so regarding both the technical and the intuitive axioms. Axiomatizations based on other, bisymmetry-like, conditions also follow as corollaries from the results of this paper. The tradeoff technique is applied to three popular theories of individual decision under uncertainty and risk, i.e., expected utility, Choquet expected utility, and prospect theory. The conditions used are better suited for empirical measurements of utility than earlier tradeoff conditions and, accordingly, are easier to test.
Universality of Nash Equilibria
Authors: Datta Ruchira S.
Published: December 2003

Every real algebraic variety is isomorphic to the set of totally mixed Nash equilibria of some three-person game, and also to the set of totally mixed Nash equilibria of an N-person game in which each player has two pure strategies. From the Nash-Tognoli Theorem it follows that every compact differentiable manifold can be encoded as the set of totally mixed Nash equilibria of some game. Moreover, there exist isolated Nash equilibria of arbitrary topological degree.
A Note on Kelso and Crawford's Gross Substitutes Condition
Authors: Fujishige Satoru , Yang Zaifu
Published: December 2003

In their 1982 article, Kelso and Crawford proposed a gross substitutes condition for the existence of core (and equilibrium) in a two-sided matching model. Since then, this condition has often been used in the literature on matching models and equilibrium models in the presence of indivisibilities. In this paper we prove that a reservation value (or utility) function satisfies the gross substitutes condition if and only if it is an M♮-concave function defined on the unit-hypercube, which is a discrete concave function recently introduced by Murota and Shioura (1999).
An Escape-Time Criterion for Queueing Networks: Asymptotic Risk-Sensitive Control via Differential Games
Authors: Atar Rami , Dupuis Paul , Shwartz Adam
Published: December 2003

We consider the problem of risk-sensitive control of a stochastic network. In controlling such a network, an escape-time criterion can be useful if one wishes to regulate the occurrence of large buffers and buffer overflow. In this paper a risk-sensitive escape time criterion is formulated, which in comparison to the ordinary escape-time criteria penalizes exits that occur on short time intervals more heavily. The properties of the risk-sensitive problem are studied in the large buffer limit and related to the value of a deterministic differential game with constrained dynamics. We prove that the game has value and that the value is the (viscosity) solution of a PDE. For a simple network, the value is computed, demonstrating the applicability of the approach.
Asymmetric First-Price Auctions—A Perturbation Approach
Authors: Fibich Gadi , Gavious Arieh
Published: December 2003

We use perturbation analysis to obtain explicit approximations of the equilibrium bids in asymmetric first-price auctions with n bidders, in which bidders' valuations are independently drawn from different distribution functions. Several applications are presented: explicit approximations of the seller's expected revenue, the maximal bid, the optimal reserve price, inefficiency, and a consequence of stochastic dominance. We also suggest an improved numerical method for calculating the seller's expected revenue.
Sustaining Technology Leadership Can Require Both Cost Competence and Innovative Competence
Authors: Schmidt Glen M. , Porteus Evan L.
Published: December 2003

Some firms, particularly in high-tech, appear to view technology leadership and cost leadership as separate and distinct ways of achieving high profits within a given product market. In contrast, we develop a model of technology competition suggesting that a firm's success in sustaining its technology leadership may hinge on its ability to produce the new product (resulting from the new technology) at lower cost, an ability we call the firm's “cost competence.” In our model, cost competence, above a critical hurdle level, is essential to the incumbent firm in its bid to retain technology leadership. The model also clarifies the role of “innovative competence,” which characterizes a firm's ability to turn an investment in new technology into a marketable product. We present an example of a standard product market model (for determining prices and production quantities for two competing products in the aftermath of the technology competition) in which the assumptions of our technology competition model hold.

An additional key finding is that there can be discontinuities in the returns that accrue from enhanced cost competence. If a firm is on the right side of a “jump point,” its expected profits can be dramatically more than if it were only slightly less competent. These jump points arise where the firm's cost competence becomes sufficient to cause a competitor to decide against competing in the new technology, or to significantly drop its investment amount. When a potential competitor backs down, the prospect of high returns for the incumbent opens up.