bluuebunny/crossref_metadata_2025 huggingface dataset:
Action Characteristics as Predictors of Competitive Responses
Authors: Chen Ming-Jer , Smith Ken G. , Grimm Curtis M.
Published: November 2008

A central question in competitive dynamics is whether a competitive response can be predicted. This study links various characteristics of actions with the total number and the time lag of competitors' responses. The hypothesized relationships were tested with a sample of competitive moves among U.S. airlines. The results suggested that responses are influenced by the characteristics of the actions that evoked them. Specifically, the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses. Strategic, as opposed to tactical, actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals' counteractions. Finally, contrary to prediction, competitors who have a high stake in the markets under attack by a competitive move react slowly.
Signals and Choices in a Competitive Interaction: The Role of Moves and Messages
Authors: Moore Marian Chapman
Published: November 2008

This study examines the effect of signals from a competitor on the decisions of managers in a situation of strategic interdependence. The context is a multi-period pricing simulation and the payoffs are structured in accordance with a Prisoner's Dilemma. The signals consist of messages from the competitor and observations of the pricing decisions made by the competitor. The managers' responses to particular types of signals and particular combinations of moves and messages change over the course of the simulation. Suggestions for future research on competitive signaling are offered.
Deterministic Capacity Expansion Under Deterioration
Authors: Rajagopalan S.
Published: November 2008

This paper considers the deterministic capacity expansion problem with deterioration. First, the paper extends the conventional model by incorporating capacity deterioration effects and operating costs that are a function of: (i) the age of the facility and (ii) the extent of utilization of capacity. The model still has the useful properties of the standard model, enabling the use of efficient algorithms. Second, the paper extends well-known planning horizon results to this model using a novel dual-based approach, which also provides additional intuition. Finally, interesting computational results are provided that compare optimal and near-optimal forecast horizon values. The impact of capacity deterioration and convexity in variable costs on forecast horizons is also considered.
A Min-Max-Max-Min Approach to Solving a Stochastic Programming Problem with Simple Recourse
Authors: White D. J.
Published: November 2008

This paper studies a problem of determining the level of certain decisions, taken prior to certain events taking place, and the subsequent additional resource procurement decisions needed to implement the initial program once these events have materialised.

The problem is formulated first of all as a max-min problem, and then as an equivalent min-max problem.

The min-max problem is easier to solve than the max-min problem.

The information provided in solving the min-max problem may be used to facilitate the solution of the max-min problem.
Optimal Acquisition of Pollution Control Equipment Under Uncertainty
Authors: Hartl Richard F.
Published: November 2008

This paper considers a firm, which has to acquire a certain amount of pollution control equipment in order to comply with government pollution standards. Due to political battles and lobbying efforts, the compliance date and the date when it is announced are not known in advance. Furthermore, the target stock of pollution control equipment is also unknown. This amounts to an optimal control problem, in which the terminal time and the terminal state are random variables for which certain probability distributions can be estimated. The model explicitly considers technological progress in the production of abatement equipment, which leads to decreasing installation costs over time. Furthermore it is assumed that having a high stock of abatement equipment at early stages improves the firm's public image and thus its revenue. Tax deductions and other benefits for health conscious firms are also taken into account.

Using optimal control theory the optimal investment in pollution control equipment is obtained, and the sensitivity with respect to discounting, wear out, technological progress and with respect to the parameters of the probability distributions is investigated.
Renovation of Public Housing: Suggestions from a Simple Model
Authors: Gleeson Michael E.
Published: November 2008

This paper presents a simple model to contrast the benefit and cost of renovating public housing units against the benefit and cost of building new ones. Benefit is measured as the additional expected life created, and empirically-estimated survivor functions for housing are used to calculate maximum costs at which renovation is cost-effective relative to new construction. Actual renovation costs for an existing program are compared with calculated maximums. Results suggest that past renovation practice may not have been cost-effective relative to new construction. Possible changes in program guidelines are presented. The paper concludes with a discussion of policy implications.
Understanding the Efficiency of Multi-Server Service Systems
Authors: Whitt Ward
Published: November 2008

In the design and operation of service systems, it is important to determine an appropriate level of server utilization (the proportion of time each server should be working). In a multi-server queue with unlimited waiting space, the appropriate server utilization typically increases as the number of servers (and the arrival rate) increases. We explain this economy of scale and give a rough quantitative characterization. We also show how increased variability in the arrival and service processes tends to reduce server utilization with a given grade of service. As part of this analysis, we develop simple approximations for the mean steady-state waiting time and the full steady-state waiting-time distribution. These approximations exploit an infinite-server approximation for the probability of delay and a single-server approximation for the conditional waiting-time distribution given that waiting occurs. The emphasis is on simple formulas that directly convey understanding.
Note—Project Selection and Sequencing to Maximize Net Present Value of the Total Return
Authors: Gupta Sushil K. , Kyparisis Jerzy , Ip Chi-Ming
Published: November 2008

This note considers a problem of simultaneous selection of a subset of N projects and determination of an optimal sequence to implement these projects so as to maximize the net present value of the total return. We first establish an optimal sequence of all projects which does not depend on the particular subset of selected projects and then propose an efficient polynomial dynamic programming method for solving the problem.
Repeated Gambles, Learning, and Risk Aversion
Authors: McCardle Kevin F. , Winkler Robert L.
Published: November 2008

We analyze a decision problem with repeated gambles and find that under some seemingly reasonable risk-averse utility functions, recommended behavior for the initial decision can be highly risk-taking and counterintuitive. Further analysis reveals that the derived utility function for the return on the first gamble is discontinuous because gains or losses carry with them positive or negative signals regarding future prospects. A variant of the basic model without a discontinuity in derived utility has essentially the same implications. The issues raised in this paper present no conceptual difficulties for the standard expected utility theory; in principle, we can model the grand world and understand fully all implications of grand-world utility functions. In practice, however, this ideal may not always be attainable and as a result we may be faced with serious modeling and assessment problems.
On Matching Book: A Problem in Banking and Corporate Finance
Authors: Shubik M. , Sobel M. J.
Published: November 2008

In each of the asset and liability markets in which the banking firm is an intermediary, typically there are instruments with differing maturities. The bank matching book problem is to manage the term structures of assets and liabilities. In our first model, the bank borrows and lends only short run. In our second model, the bank borrows only short run but can lend short run and long run. The criterion in both models is the expected value of the present value of dividends issued. Both models yield dynamic programming problems. Broad aspects of optimal policies are indicated.
Present Values with Renewals
Authors: Washburn Alan
Published: November 2008

Expected present values can be calculated in the presence of a sequence of events that cause the cash flow process to restart after each one. Methods are derived and illustrated by examples.
Risk, Return, Skewness and Preference
Authors: Brockett Patrick L. , Kahane Yehuda
Published: November 2008

This paper considers choice between individual projects and shows that when the choice set includes arbitrary distributions, then any assumed relationship between expected utility theory and general moment preferences for individual decision makers is theoretically unsound. In particular, a risk averse investor with any common utility function may, when choosing between two positive return opportunities, prefer the project simultaneously having a lower mean, higher variance, and lower positive skewness. Moreover, the decision maker can prefer opportunities with higher variance even when the opportunities are continuous, unimodal, and arbitrarily visually and statistically close to the normal distribution in shape. Our conclusions hold for any decision maker with a utility function whose derivatives alternate in sign being strictly positive or negative (i.e., we exclude the uninteresting cases of quadratic and cubic utilities).

The method of analysis is based upon the theory of Tchebychev systems of functions which deals with the expected value of [utility] functions of stochastic variables with known moments. Although we focus on the first three moments, the results, as presented here, apply to all higher moments as well. It is also shown that there can be extremely large deviations between the certainty equivalents of distributions having the same moments, so this result is also pertinent to practical decision analysts as well. The paper demonstrates that the properties of utility functions have implications which are much more subtle than previously recognized for evaluating distributions in terms of their moments.
Service by a Queue and a Cart
Authors: Coffman E. G. , Gilbert E. N.
Published: November 2008

Items arrive randomly at a production facility that functions as a single-server queueing system. The items might represent parts, raw material, etc. and the server might be a factory worker or a machine in a production line. Following service, items are placed in a buffer where they are accumulated before delivery to a customer or some downstream activity in a production line. In practice, the buffer might be called a hopper; it may take the form of a cart or a pallet moved by a forklift. For simplicity the discussion here keeps with the cart terminology.

The cart is delivered at times to be determined; during its absence the queue will in general grow by new arrivals. An item's average time in system, from arrival to delivery, is to be made small. The system must compromise between infrequent deliveries to avoid long delays in the queue and frequent deliveries to avoid long waits in the cart. This problem has a simple relation with standard batch-sizing problems in production scheduling.

The cart delivery (batch-sizing) strategy considered here depends on two integers M and N. Delivery begins when N are in the cart or when the queue is empty and at least M are in the cart (M ≤ N). Items are assumed to arrive by a Poisson process, and their service times have a general distribution. Generating functions are derived which determine probability distributions for the numbers k in the cart, q in the queue, and k + q in the system. Numerical results are given for special cases M = N, N = ∞, and M = 0.
Nonlinear Utility Models Arising from Unmodelled Small World Intercorrelations
Authors: Bordley Robert F. , Hazen Gordon
Published: November 2008

Savage's axioms show the rationality of maximizing expected utility when all uncertainties are explicitly modelled. But individuals actually make decisions in bounded contexts called small worlds. Savage's axioms do not imply the optimality of maximizing expected utility in small worlds unless lotteries in different small worlds are probabilistically independent. Relaxing this independence assumption causes Savage's axioms to imply the optimality of maximizing a nonlinear utility model which includes, as special cases, the Chew weighted linear utility model, the Bell elation/disappointment model and the Allais mean/variance model in utility-independent small worlds.
Managerial Applications of Neural Networks: The Case of Bank Failure Predictions
Authors: Tam Kar Yan , Kiang Melody Y.
Published: November 2008

This paper introduces a neural-net approach to perform discriminant analysis in business research. A neural net represents a nonlinear discriminant function as a pattern of connections between its processing units. Using bank default data, the neural-net approach is compared with linear classifier, logistic regression, kNN, and ID3. Empirical results show that neural nets is a promising method of evaluating bank conditions in terms of predictive accuracy, adaptability, and robustness. Limitations of using neural nets as a general modeling tool are also discussed.
Composition Rules for Building Linear Programming Models from Component Models
Authors: Murphy Frederic H. , Stohr Edward A. , Ma Pai-Chun
Published: November 2008

This paper describes some rules for combining component models into complete linear programs. The objective is to lay the foundations for systems that give users flexibility in designing new models and reusing old ones, while, at the same time, providing better documentation and better diagnostics than is provided by current systems. The results presented here rely on two different sets of properties of LP models: first, the syntactic relationships among indices that define the rows and columns of the LP, and second, the meanings attached to these indices. These two kinds of information allow us to build a complete algebraic statement of a model from a collection of components provided by the model builder.
Pooling in Two-Location Inventory Systems with Non-Negligible Replenishment Lead Times
Authors: Tagaras George , Cohen Morris A.
Published: November 2008

This paper deals with the analysis of two-location periodic review inventory systems with non-negligible replenishment lead times. Emergency transshipments are used in these systems as a recourse action to reduce the occurrence of shortages. A class of partial pooling policies is proposed for the control of transshipments. The cost performance of this class of policies is shown to be inferior to that of complete pooling. An approximate model and a heuristic algorithm are introduced to compute near-optimal stocking policy solutions. Comparisons with simulation results verify the satisfactory performance of the approximate model and algorithm. Numerical sensitivity analysis provides additional insight into the nature of optimal transshipment behavior.
Control Charts in the Presence of Data Correlation
Authors: Wardell Don G. , Moskowitz Herbert , Plante Robert D.
Published: November 2008

Traditional statistical process control charts assume that observations are independent and normally distributed about some mean. We investigate the robustness of traditional charts to data correlation when the correlation can be described by an ARMA(1,1) model. We compare the performance of the Shewhart chart and the Exponentially Weighted Moving Average (EWMA) chart to the performance of the Special-Cause Control (SCC) chart and the Common-Cause Control (CCC) chart proposed by Alwan and Roberts (1988), which are designed to account for data correlation. We also explore the possibility of putting limits on the CCC chart, in order to predict quality abnormalities. The measure of performance used is the average run length (ARL). The results show that the ability of the EWMA chart to detect shifts in the process mean is quite robust to data correlation, while the corresponding individuals Shewhart chart rarely detects such shifts more quickly than the other charts. The SCC and CCC charts are shown to be preferred in most cases when a shift in the process mean exceeds 2 standard deviations. The experimental results can aid practitioners in deciding which chart would be most effective at detecting specified shifts in the process mean given the nature of their particular correlated environments. Two methodologies are utilized to explain the relative performance of the SPC charts compared: the dynamic step response function, and response surface methodology. Such methods not only facilitate a discussion of our results, but also make it possible to predict the relative performance of the charts when the process can be described by a model which is more complex than the ARMA(1,1) model.
Pricing and Capacity Decisions for a Service Facility: Stability and Multiple Local Optima
Authors: Stidham Shaler
Published: November 2008

We consider a model for optimal pricing and capacity for a service facility. The problem is formulated as one of optimal design of a single-server queueing system, in which the design variables are the service rate and the arrival rate (equivalently, the price charged for admission). The model is a variant of one introduced by Dewan and Mendelson. We allow for an upper bound on the arrival rate and consider slightly more general user value functions. We show that an optimal solution may not lie in the interior of the feasible region and thus may not be characterized by the first-order differential conditions. Moreover, the first-order conditions typically have several solutions, some of which may be relative minima and produce a negative value of the objective function (customer value minus the sum of expected delay cost and capacity cost per unit time). We also examine the stability of the equilibrium arrival rate and the convergence of a dynamic adaptive algorithm for finding the optimal service rate, in the context of a model in which the distribution of customers' value of service is uniform. We show that the equilibrium arrival rate is stable if and only if the service rate is above a threshold value, which depends on the price charged for admission and the parameters of the uniform distribution of value of service. The dynamic, adaptive algorithm always converges to a relative maximum of the objective function if the service rate can be adjusted every time the arrival rate changes. Otherwise, the algorithm will start to diverge if and when the service rate ever falls below the threshold value associated with stability of the equilibrium arrival rate.
A Multiple-Objective Programming Technique for Structuring Tax-Exempt Serial Revenue Debt Issues
Authors: Puelz Amy v. , Lee Sang M.
Published: November 2008

A multiple-objective decision model to structure tax-exempt serial revenue bonds is presented in this paper. Based on goals dealing with true interest cost, marketability, debt coverage, production, and level debt, we define a goal programming model to generate a maturity schedule and coupon rate assignment for a municipal bond issue. The model is designed to be a flexible interactive decision making tool to aid in the development of a minimal-risk, cost-effective issue.
An Integrated Model for Job-Shop Planning and Scheduling
Authors: Lasserre J. B.
Published: November 2008

We consider an integrated job-shop planning and scheduling model. To solve the problem we use a (multi-pass) decomposition approach which alternates between solving a planning problem with a fixed sequence of products on the machines, and a job-shop scheduling problem for a fixed choice of the production plan. The generated production plans are feasible i.e., there exists at least one feasible schedule to realize that plan. Quality of the solution is investigated and numerical results are presented.
Gaining Comparative Advantage Through Discretionary Expenditures: The Returns to R&D and Advertising
Authors: Erickson Gary , Jacobson Robert
Published: November 2008

We explore the extent to which R&D and advertising expenditures generate a comparative advantage that allows firms to earn supranormal profits. After controlling for unobserved firm-specific factors and the feedback between discretionary expenditures and profitability, our results suggest substantially lower accounting and stock market returns to R&D and advertising than indicated in previous research. Isolating mechanisms, which prevent imitation, do not appear sufficient for either R&D or advertising expenditures to generate, on the average, a long-run comparative advantage.
Note—Operator Assignment and the Parametric Preflow Algorithm
Authors: Wittrock Robert J.
Published: November 2008

This note addresses a problem of assigning human operators to operations in a manufacturing system. The problem involves a set of operations, a work load for each operation, and a set of human operators, each skilled at a subset of the operations. The task is to assign the operators to the operations so as to maximize the capacity of the system, robustly. The problem is formulated as a network flow problem with a lexicographic objective. It is then shown how to solve this problem very efficiently as a parametric sequence of network maximum flow problems, by application of the “parametric preflow” algorithm of Gallo, Grigoriadis and Tarjan.
Note—Pathwise Convexity and its Relation to Convergence of Time-Average Derivatives
Authors: Glynn Peter W.
Published: November 2008

In this note, we further develop the pathwise convexity approach introduced by Hu (1991) to prove consistency of infinitesimal perturbation analysis for the derivative of the steady-state waiting time of the G/G/1 queue. In addition to generalizing the argument, we illustrate the technique with applications to stochastic storage theory and networks of queues.
Models for Measuring and Accounting for Cost of Conformance Quality
Authors: Nandakumar P. , Datar S. M. , Akella R.
Published: November 2008

We build a model to measure and account for the cost of quality. We incorporate the impact of quality on lead time variance and on service reliability and demand. Quality costs are a joint and nonlinear function of various parameters of the manufacturing process. Our model shows that it may not be optimal for quality improvement efforts to target products that have the highest defective levels, largest direct costs or consume the maximum capital resources. A stochastic dynamic programming model is developed to evaluate the optimal trade-offs across prevention and appraisal costs, and the costs of failure.
Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking
Authors: Kahneman Daniel , Lovallo Dan
Published: November 2008

Decision makers have a strong tendency to consider problems as unique. They isolate the current choice from future opportunities and neglect the statistics of the past in evaluating current plans. Overly cautious attitudes to risk result from a failure to appreciate the effects of statistical aggregation in mitigating relative risk. Overly optimistic forecasts result from the adoption of an inside view of the problem, which anchors predictions on plans and scenarios. The conflicting biases are documented in psychological research. Possible implications for decision making in organizations are examined.
Experimentation and Optimal Output Decisions: The Cooperative Versus the Entrepreneurial Firm
Authors: Thompson Patrick , Horowitz Ira
Published: November 2008

This paper studies and contrasts the experimental inclinations of entrepreneurial and cooperative firms supplying a perishable good under uncertain demand, when larger stocks might yield additional information about the demand-generating process. While these firms might react differently, and in the case of the cooperative not unambiguously, to environmental change, neither variant will find the higher output—possibly more informative—option especially attractive.
Solving Infinite-Horizon Discounted Markov Games Using a Superharmonic Least-Element Algorithm
Authors: White D. J.
Published: November 2008

In this paper we present an algorithm for solving infinite-horizon discounted Markov games based upon the fact that the value function is a least element of a superharmonic set. The algorithm produces a pair of policies whose value function is within a specified error of the solution to the fixed point equation. Part of the algorithm involves solving a set of fractional programs which are replaced by equivalent linear programs.
Note: Microcomputer Performance of “FABLE” on Hoffmann's Data Sets
Authors: Johnson Roger V.
Published: November 2008

Some of the legitimacy of Hoffmann's (1992) Eureka is gained from his statement that

“Eureka … would seem to be approximately six times as fast (as Johnson's (1988) FABLE on the literature set). However, Eureka had one problem for which its solution was one station over the optimal, whereas FABLE's solutions were all optimal.”
The Valuation of Path Dependent Contracts on the Average
Authors: Ritchken Peter , Sankarasubramanian L. , Vijh Anand M.
Published: November 2008

This article values option contracts based on the average price realized over a finite time horizon. Such contracts are of importance to traders who periodically transact in spot markets and who require protection from adverse moves in their total accrued costs realized over their trading horizons. Explicit valuation models for pricing a variety of path dependent contracts based on geometric and arithmetic averages are developed. The early exercise features of American contracts are investigated, and it is shown that this feature has significant value.
Evaluating the Overflow Probability Using the Infinite Queue
Authors: Sakasegawa Hirotaka , Miyazawa Masakiyo , Yamazaki Genji
Published: November 2008

This paper presents an approximation formula for the overflow probability for GI/GI/c(N) queues in terms of a queue-length distribution for the corresponding GI/GI/c(∞) queues, where N is the total capacity of the system. The approximation is based on the conservation law, and on assumptions which might be acceptable if N ≫ c. The authors' approximation formula is numerically examined for various phase-type GI/GI/c(N) queues and the results show that the approximation is very good for practical parameter settings. The authors' approximation stands merely on a stationarity assumption. Therefore, it is also expected to be good for G/G/c(N) queues with a large N.
Maximum Likelihood, Consistency and Data Envelopment Analysis: A Statistical Foundation
Authors: Banker Rajiv D.
Published: November 2008

This paper provides a formal statistical basis for the efficiency evaluation techniques of data envelopment analysis (DEA). DEA estimators of the best practice monotone increasing and concave production function are shown to be also maximum likelihood estimators if the deviation of actual output from the efficient output is regarded as a stochastic variable with a monotone decreasing probability density function.

While the best practice frontier estimator is biased below the theoretical frontier for a finite sample size, the bias approaches zero for large samples. The DEA estimators exhibit the desirable asymptotic property of consistency, and the asymptotic distribution of the DEA estimators of inefficiency deviations is identical to the true distribution of these deviations. This result is then employed to suggest possible statistical tests of hypotheses based on asymptotic distributions.
Inconsistent Trade-Offs Between Attributes: New Evidence in Preference Assessment Biases
Authors: Delquié Philippe
Published: November 2008

One of the fundamental postulates of rational choice is that preferences manifested by an individual towards alternatives should only depend on the merits of these alternatives and not on extraneous, irrelevant factors. Violations of this basic principle, so-called preference reversals, have puzzled researchers for over twenty years and raised concerns about the use of preference modeling in decision analysis. The present work seeks to further determine the nature of these phenomena, in particular the role played by response mode in certain types of preference reversals. Hershey and Schoemaker (1985) found Probability and Certainty Equivalents to differ systematically and attributed this difference to a framing effect. Here, we generalize their experimental design to control for framing effects and study biases on a larger scope. Our results show that biases do not disappear in the absence of framing, instead they reveal a clear and pervasive bias occurring under more controlled experimental conditions than previously known: direct trade-offs between two attributes X and Y are biased depending on whether X is traded off against Y, or Y traded off against X. From among several hypotheses, the data lend support to the general principle of compatibility (Tversky et al. 1988; Slovic et al. 1990), which implies that an attribute receives more relative weight when it is used as “currency” in trading off.
Simulation Factor Screening Using Harmonic Analysis
Authors: Morrice Douglas J. , Schruben Lee W.
Published: November 2008

In this paper, we provide a quantitative approach to Frequency Domain Methodology (FDM) using harmonic analysis. For a certain class of metamodels, we give the frequency domain hypothesis and develop the corresponding hypothesis test. Minimum simulation model run length information for FDM is provided for a subclass of these metamodels. We discuss factor screening designs to increase the power of the test and illustrate these designs by an example.
Optimal Control of a Manufacturing Process That Involves Trial Runs
Authors: Gallego Guillermo , Yao David D. , Moon Ilkyeong
Published: November 2008

We study a manufacturing process that is quite common in semiconductor wafer fabrication. In generic terms, the job to be processed consists of J units. To process the job, a “setup” is required, followed by routine processing and testing. In principle, the entirety of the job can be set up and processed in a single batch. However, the setup is prone to failure, leading to loss of units. Hence, in practice trial runs are often conducted, with each trial involving a small batch of units. Here we identify an optimal control of such processes. The policy prescribes a maximum of k* (≤J) single-unit trial runs. To establish optimality, we use the recently developed notion of stochastic convexity/concavity and related machinery.
An Expert System for Maritime Pilots: Its Design and Assessment Using Gaming
Authors: Grabowski Martha , Wallace William A.
Published: November 2008

Increased maritime traffic, new types of vessels, and construction of oil and gas producing structures have made navigating in close waters more hazardous. In addition, attempts to increase shipboard productivity have resulted in fewer personnel on board the vessel. This paper reports on the development and evaluation of a prototype expert system to support the cognitive processes involved in piloting: maneuvering and collision avoidance, and the practice of good seamanship. A model was constructed and implemented in a frame- and rule-based representation. The system was assessed using gaming with novice pilots in a merchant marine training facility. The results showed significant improvement in the bridge watch team performance, but no significant improvement in vessel performance in terms of trackkeeping. The paper concludes with a discussion of the motor, perceptual, and cognitive skills needed for piloting and how they could be supported by expert system technology as part of an integrated bridge system, an operational center for navigational and supervisory tasks aboard a ship.
Notes: The “Gambler's Fallacy” in Lottery Play
Authors: Clotfelter Charles T. , Cook Philip J.
Published: November 2008

The “gambler's fallacy” is the belief that the probability of an event is lowered when that event has recently occurred, even though the probability of the event is objectively known to be independent from one trial to the next. This paper provides evidence on the time pattern of lottery participation to see whether actual behavior is consistent with this fallacy. Using data from the Maryland daily numbers game, we find a clear and consistent tendency for the amount of money bet on a particular number to fall sharply immediately after it is drawn, and then gradually to recover to its former level over the course of several months. This pattern is consistent with the hypothesis that lottery players are in fact subject to the gambler's fallacy.
The Effects of Population Aging on the Physician Services Market: A Computable Equilibrium Analysis
Authors: Wade Martcia
Published: November 2008

This paper formulates a computable equilibrium model (CEM) of the market for physician services. The simulation results based upon the CEM are consistent with widely held beliefs about the effects of aging on the health care sector, for example, that aggregate expenditures will increase as the population ages. In addition, however, the simulations suggest differential effects on prices and expenditures for various types of services and on expenditures by different types of consumers. For example, prices and aggregate expenditures for services typically used by the elderly are found to increase under “older” age distributions, whereas prices and aggregate expenditures for other services are found to decrease. Elderly women are found to be unequivocally worse off under older as opposed to younger age structures; they spend more yet consume fewer services.
A Lower Bound and an Efficient Heuristic for Multistage Multiproduct Distribution Systems
Authors: Iyogun Paul , Atkins Derek
Published: November 2008

This paper concerns lot-sizing in a multistage and multifacility pure distribution network. A facility at the end of the distribution network experiences a deterministic and continuous demand. Each facility has an echelon holding cost rate for each item it distributes, and a facility-dependent set up cost. In this paper an algorithm is presented of complexity 0(rd log r) where r is the number of end facilities and d is the maximum depth of the distribution system. The algorithm exploits a lower bound obtained by decomposing the distribution network into facilities-in-series problems. Using a set up cost allocation procedure, the maximum of the continuous solution of the decomposed problem is obtained. This maximizing solution provides the lower bound which is used for solving the distribution problem. This gives a power-of-two heuristic with a worst case performance no more than 2% above optimal.
Selecting Product Development Projects: Pioneering versus Incremental Innovation Strategies
Authors: Ali Abdul , Kalwani Manohar U. , Kovenock Dan
Published: November 2008

In this paper, we investigate project selection choices of duopolists facing two alternatives: undertaking a “pioneering” type project (Type A) aimed to develop a highly innovative product, or an “incremental innovation” type project (Type B) aimed to develop a less innovative product such as the modification of an existing product. A key objective of our research is to examine how firm characteristics such as their differential efficiencies in completing projects, differences in the degree of substitutability between Type A and B products, and first mover advantages affect product development strategies. We develop a game-theoretic model to obtain insights into the project selection problem taking into account competitive reactions to a firm's choice of project development strategies and technical uncertainties associated with project completion times. We report model findings on recommended project selection strategies for efficient and disadvantaged firms. Further, we examine how a firm's choice of a Type A project is affected by an increase in the variance of the project completion time of a Type A project relative to that of a Type B project, while the ratio of their mean completion times is held constant.
Bayesian Forecasting for Seemingly Unrelated Time Series: Application to Local Government Revenue Forecasting
Authors: Duncan George , Gorr Wilpen , Szczypula Janusz
Published: November 2008

One important implementation of Bayesian forecasting is the Multi-State Kalman Filter (MSKF) method. It is particularly suited for short and irregular time series data. In certain applications, time series data are available on numerous parallel observational units which, while not having cause-and-effect relationships between them, are subject to the same external forces (e.g., business cycles). Treating them separately may lose useful information for forecasting. For such situations, involving seemingly unrelated time series, this article develops a Bayesian forecasting method called C-MSKF that combines the MSKF method with the Conditionally Independent Hierarchical method. A case study on forecasting income tax revenue for each of forty school districts in Allegheny County, Pennsylvania, based on fifteen years of data, is used to illustrate the application of C-MSKF in comparison with univariate MSKF. Results show that C-MSKF is more accurate than MSKF. The relative accuracy of C-MSKF increases with decreasing length of historical time series data, increasing forecasting horizon, and sensitivity of school districts to the economic cycle.
Flow Management in Flexible Manufacturing Cells with Pipeline Operations
Authors: Agnetis A. , Lucertini M. , Nicolo F.
Published: November 2008

The problem of flow management for a class of flexible manufacturing cells is considered. The cell is designed for cyclic production of one product. This product is characterized by a sequence of operations of given length and each requiring a set of resources; the problem is therefore to allocate such resources and scheduling the operations in order to maximize the throughput. A general model is proposed and several special cases are discussed, corresponding to either polynomial or NP-complete problems. The cases analyzed differ from each other in the number of operating machines and in the number of product units present at the same time in the cell. The solution to the polynomial problems is given in terms of shortest path on particular networks.
A Multistage Screening Model for Evaluation and Control of Misclassification Error in the Detection of Hypertension
Authors: Moskowitz Herbert , Plante Robert , Tsai Hsien-Tang
Published: November 2008

Hypertension is one of the most important risk factors with respect to coronary heart disease and stroke. The benefits of early detection of hypertension and the subsequent design of follow-up treatment programs are well documented. Consequently, screening programs have been designed to identify subjects as normotensive (normal) or hypertensive (abnormal). In order for these programs to be effective, full participation of the subject population is required. However, such classification programs can incur massive risks of incorrectly classifying subjects as normotensive who are truly hypertensive and incorrectly classifying subjects as hypertensive who are truly normotensive. To date, the only means to reduce these risks of misclassification is to require subjects to make numerous visits for blood pressure measurement before they can be classified. Such requirements reduce the level of participation in screening programs and also delay the identification of subjects who are truly hypertensive, thereby depriving them of the benefits of early detection and immediate follow-up treatment.

We propose a multiple-stage screening model that controls for maximum as well as average misclassification error which is used to design and/or evaluate screening programs for hypertension. A multiple-stage screening model not only permits the early detection of subjects who are truly hypertensive, but also requires a much smaller level of participation of subjects, while retaining control of misclassification risks that are comparable to those of screening programs based on numerous visits. We then design multiple-stage screening programs for several different subject populations.
The Impact of Autocorrelation on Queuing Systems
Authors: Livny Miron , Melamed Benjamin , Tsiolis Athanassios K.
Published: November 2008

The performance of single-server queues with independent interarrival intervals and service demands is well understood, and often analytically tractable. In particular, the M/M/1 queue has been thoroughly studied, due to its analytical tractability. Little is known, though, when autocorrelation is introduced into interarrival times or service demands, resulting in loss of analytical tractability. Even the simple case of an M/M/1 queue with autocorrelations does not appear to be well understood. Such autocorrelations do, in fact, abound in real-life systems, and worse, simplifying independence assumptions can lead to very poor estimates of performance measures. This paper reports the results of a simulation study of the impact of autocorrelation on performance in an FIFO queue. The study used two computer methods for generating autocorrelated random sequences, with different autocorrelation characteristics. The simulation results show that the injection of autocorrelation into interarrival times, and to a lesser extent into service demands, can have a dramatic impact on performance measures. From a performance viewpoint, these effects are generally deleterious, and their magnitude depends on the method used to generate the autocorrelated process. The paper discusses these empirical results and makes some recommendations to practitioners of performance analysis of queuing systems.
Including the Value of Time in Design-for-Manufacturing Decision Making
Authors: Ulrich Karl , Sartorius David , Pearson Scott , Jakiela Mark
Published: November 2008

Design for manufacturing (DFM) has been promoted as a way to enhance product development and production system performance. Current DFM practices encourage the minimization of the number of parts in a design through the physical integration of several geometric features in the same part. While this part integration often reduces the manufacturing cost of the product, it also can extend product development lead time, because complex parts typically require tooling with large lead times. This paper presents an economic model that makes explicit the trade-off between lower unit costs and longer product development time. This model is applied to a particular example in a field study of the application of DFM to Polaroid cameras.
A Dual Ascent and Column Generation Heuristic for the Discrete Lotsizing and Scheduling Problem with Setup Times
Authors: Cattrysse Dirk , Salomon Marc , Kuik Roelof , Van Wassenhove Luk N.
Published: November 2008

In this paper the Discrete Lotsizing and Scheduling Problem (DLSP) with setup times is considered. DLSP is the problem of determining the sequence and size of production batches for multiple items on a single machine. The objective is to find a minimal cost production schedule such that dynamic demand is fulfilled without backlogging.

DLSP is formulated as a Set Partitioning Problem (SPP). We present a dual ascent and column generation heuristic to solve SPP. The quality of the solutions can be measured, since the heuristic generates lower and upper bounds. Computational results on a personal computer show that the heuristic is rather effective, both in terms of quality of the solutions as well as in terms of required memory and computation time.
An Inventory Model of Immediate and Delayed Delivery
Authors: Moinzadeh Kamran , Ingene Charles
Published: November 2008

This paper considers the long run, profit maximizing strategy of a distributor that holds a good (good 1) in inventory for immediate delivery and that offers a second good (good 2) for delayed delivery. When the two goods are substitutes, an out-of-stock situation for good 1 will cause some consumers (“walkers”) to seek the good elsewhere, other consumers (“waiters”) to accept a raincheck for later delivery of good 1, and others still (“switchers”) to place an order for good 2. It is shown that a profit maximizing strategy may entail setting a price for the delayed delivery item so as to encourage switching behavior. The rationale is that the distributor can hold a smaller inventory, thereby incurring lower holding costs, because out-of-stock situations are less costly than they would be without some consumers being willing to switch.
How to Settle an Estate
Authors: Weingartner H. Martin , Gavish Bezalel
Published: November 2008

This paper considers the equitable division of a set of assets, all or some of which are indivisible, among two beneficiaries, simultaneously using several methods of valuing the assets. The problem arises when a fiduciary is required to distribute the assets—of a trust or estate, or to divide the property in a divorce or in dissolution of a partnership—in which the assets have separate market values and tax bases. In other variations of this problem, the beneficiaries are presumed also to possess an infinitely divisible asset, such as cash, or some of the assets may be liquidated. Models for combining consideration of subjective values for the assets in addition to the objective market values are considered. Computational methods for these problems are discussed and illustrated.
Effects of Ambiguity in Market Experiments
Authors: Sarin Rakesh K. , Weber Martin
Published: November 2008

Prior studies have shown that individuals are averse to ambiguity in probability. Many decisions are, however, made in market settings where an individual's decision is influenced by decisions of others participating in the market. In this paper, we extend the previous research to evaluate the effect of ambiguity on individual decisions and the resulting market price in market settings. We therefore examine an important issue: whether ambiguity effects persist in the face of market incentives and feedback.

Two different market organizations, the sealed bid auction and the double oral auction, were employed. The subjects in the experiments were graduate business students and bank executives. Our results show that the individual bids and market prices for lotteries with ambiguous probabilities are consistently lower than the corresponding bids and market prices for equivalent lotteries with well-defined probabilities. The aversion to ambiguity therefore does not vanish in market settings.

Our results provide insights into what a manager can expect in bidding situations where the object of the sale (oil leases, mineral rights) involves ambiguity in probability due to, for example, lack of information or prior experience. The results may also be useful in understanding some phenomena in insurance and equity markets.