bluuebunny/crossref_metadata_2025 huggingface dataset:
Joint Inventory Replenishments with Group Discounts Based on Invoice Value
Authors: Chakravarty Amiya K.
Published: November 2008

The study focuses attention on a grouping procedure for the purpose of joint inventory replenishments from a single supplier. The grouping procedure exploits the group discounts available on the total purchase value of a group of index and the economies of scale of order placing costs. In particular it is shown that the optimal groups are formed such that the annual (dollar) usage values of the items do not decrease (may increase or stay the same), from the first to the last group. This is similar in concept to the well-known ABC classification of inventory items. The grouping problem is modeled as a “shortest-path” using the above property.
Approximation Methods for the Uncapacitated Dynamic Lot Size Problem
Authors: Bitran Gabriel R. , Magnanti Thomas L. , Yanasse Horacio H.
Published: November 2008

We provide worst case error bounds for several approximation methods (heuristics, product aggregation, and partitioning of the planning horizon) for the uncapacitated dynamic lot size problem. We propose two managerially oriented heuristics and show that they have a relative wont case error bound equal to two, and develop similar analyses for methods known as the least cost per unit heuristic, the part period balancing heuristic, and an economic order quantity heuristic (expressed in terms of a time supply of demand). We also show how errors introduced by partitioning of the planning horizon in multi-product multi-facility problems are bounded by product set-up costs, and how errors introduced by product aggregation are bounded by set-up costs, holding costs, and demands. The latter results suggest methods for product aggregation that minimize the worst case error bounds.
Ordinal Ranking with Intensity of Preference
Authors: Cook Wade D. , Kress Moshe
Published: November 2008

In conventional ordinal ranking models the voter/ranker supplies an ordered set of preferences on a collection of objects without specifying any form of intensity of preference. For example, an executive committee of ten members is required to assign five candidates to five positions. The nature of the positions is such that position one requires the highest qualified candidate (relative to a given attribute), position two the second qualified person and so on.

Each one of the members in the committee is required, therefore, to supply a ranking of the five candidates and from each individual preference the committee must come up with an aggregate or consensus ranking which dictates the assignments of the candidates to the jobs. In many situations, however, it is desirable to permit the individual to express some measure of intensity of preference. For example, suppose that six committee members agreed that candidate number one is slightly better than candidate number two, but four of them evaluated candidate number two as being much better than candidate number one. The question now is whether this situation is identical to the case where the six members evaluate candidate one as much better than candidate two and four members evaluate candidate two as slightly better than candidate one. The ordinal ranking model will not distinguish between the above two cases while it is clear that when taking account of the intensity of preference, the committee should end up with two different consensus rankings.

This paper develops a model for aggregating ordinal rankings in which the voter is allowed to express such intensity of preferences, and a method to derive the consensus ranking is proposed.
Reversibility of Tandem Blocking Queueing Systems
Authors: Yamazaki Genji , Kawashima Takeshi , Sakasegawa Hirotaka
Published: November 2008

This paper is concerned with queueing systems of several service stations in series in which each station may consist of multi-servers. An infinite number of customers always waits in front of the first station, and each customer passes through all of the stations in sequence. There is only a finite number of waiting positions between any two adjacent stations. The service time for a customer at any station is assumed to be a random variable, the distribution of which may depend on the station. In this mode of operation the servers at any station will at any time be busy, idle, or blocked. This blocking system is said to be C-reversible if the capacity remains invariant under reversal of the system. The reversed system is obtained by reversing the original stations' order, that is, every customer in the reversed system passes through the original stations in the reverse order. It has already been proved that C-reversibility holds for any blocking system in which each station consists of either a single server of nondeterministic service times or multi-servers of deterministic service times, and that the blocking system has a stronger property than C-reversibility.

In this paper we show that two-station blocking systems with multi-server stations of nondeterministic service times are C-reversible, but this property can no longer be extended to three or more station blocking systems with multi-server stations of nondeterministic service times. We also show for the case of multi-server stations of nondeterministic service times that the stronger property which involves invariance of distribution does not hold even for two-station blocking systems.
Use of Sample Information in Stochastic Recourse and Chance-Constrained Programming Models
Authors: Jagannathan R.
Published: November 2008

In probabilistic linear programming models the decision maker is typically assumed to know the probability distribution of the random parameters. Here it is assumed that the distribution functions of the parameters have a specified functional form F(t, θ), where θ is an unknown (real) vector parameter. We suppose that the decision maker has the opportunity of observing a random sample drawn from F(t, θ). For a two-stage stochastic programming with recourse model the deterministic equivalent model is found using a Bayesian approach. Properties are presented for the deterministic equivalents in general and in the special case of the simple recourse model. Expressions for Expected Value of Sample Information (EVSI) and Expected Net Gain from Sampling (ENGS) are also derived. In the final section similar results are obtained for chance constrained programming models.
Continuous-Review Policies for a Multi-Echelon Inventory Problem with Stochastic Demand
Authors: De Bodt Marc A. , Graves Stephen C.
Published: November 2008

This paper considers a multi-stage, serial inventory system. The demand for the end item is stochastic and stationary. The relevant costs include a fixed ordering cost and an echelon inventory holding cost for each stage, and a backordering cost for the end item. The objective is to find a continuous-review inventory control policy that minimizes the expected average costs. We present and analyze an approximate cost model. Our approximation is analogous to that for the traditional single-item, continuous-review inventory model that assumes a reorder-point, reorder-quantity policy. We obtain policies that are natural extensions to those for the single-item model.
An Integer Nonlinear Goal Programming Model for the Deployment of State Highway Patrol Units
Authors: Taylor Bernard W. , Moore Laurence J. , Clayton Edward R. , Davis K. Roscoe , Rakes Terry R.
Published: November 2008

A number of models have been developed in recent years for the allocation and deployment of urban police units. However, these models are not directly applicable to the state highway patrol counterparts. Although urban police and the state highway patrol are both law enforcement agencies, an urban police force typically operates by reacting to crimes already committed (i.e., a reactive mode of operation) while the state highway patrol attempts to maintain a visible presence to prevent infractions (i.e., a proactive mode of operation). This paper describes a modeling approach that can be used to deploy state highway patrol cars to the road segments comprising a highway patrol district. Specifically, an integer nonlinear goal programming model is described and demonstrated within the context of a hypothetical case example. The model reflects the fact that the relationships between unit deployment and performance measures are often nonlinear—as additional patrol units are assigned to a road segment, performance will increase but at a decreasing rate. The model's goal constraints reflect the proactive nature of patrol deployment. The model is solved using a modified multi-criteria pattern/gradient search technique, and the results are analyzed to test their sensitivity to goal levels and priority structures.
Beta in Linear Risk Tolerance Economies
Authors: Grauer Robert R.
Published: November 2008

This paper employs numerical means to examine: (i) the expected return-beta plot in power utility Linear Risk Tolerance (LRT) economies, and (ii) whether, in the power utility economies, a valuation equation containing covariance and coskewness terms might better explain expected returns than one containing covariance terms alone. The results show that the expected return-beta plots constructed from real world return distributions are very similar to the plots found in empirical tests of the Mean Variance Capital Asset Pricing Model (MV CAPM). Hence a power utility LRT CAPM may provide a better theory of asset pricing than the MV CAPM does. While beta is not the correct measure of risk in power utility LRT economies, the results show that on average a valuation equation containing covariance terms only explains expected returns better than a valuation equation containing both covariance and coskewness terms.
A Note on Competitive Bidding with Asymmetric Information
Authors: Rob Rafael
Published: November 2008

This note reexamines a problem of competitive bidding under asymmetrical information about the value of the object which was originally formulated and studied by R. Wilson (Wilson, R. B. 1967. Competitive bidding with asymmetric information. Management Sci. 13 816–820.). We analyze the Stackelberg equilibria of the game under alternative behavioral assumptions about the sequencing of moves. The relative gains of the seller and the two buyers are computed for specific numerical examples.
A Tactical Decision Algorithm for the Optimal Dispatching of Oil Spill Cleanup Equipment
Authors: Psaraftis Harilaos N. , Ziogas Babis O.
Published: November 2008

We develop an optimization procedure for assisting decision-makers in the allocation of resources for cleaning up a specific oil spill. The objective function is to minimize a weighted combination of spill-specific response and damage costs. Inputs to this problem include information about the outflow of oil, availability and performance of spill cleanup equipment, as well as costs of equipment transported and on-scene operation. A general (albeit separable) damage function is assumed. The algorithm is deterministic and is based on a dynamic program within which a series of 0-1 knapsack problems are solved repeatedly. Although this algorithm is approximate, its worst-case performance is quantified and we argue that under realistic inputs the procedure can be expected to produce solutions very close to optimality. Under prescribed conditions we prove that the algorithm produces optimal solutions. A realistic example based on the Argo Merchant oil spill is presented to provide insight into the structure of this problem. Finally, we discuss possible uses of this model within the existing and alternative operational and policy environments.
On Combining Forecasts: Some Extensions and Results
Authors: Bopp Anthony E.
Published: November 2008

This paper is about the motivation, methodology, and evaluation of combining the forecasts from two or more different models in a “combined” forecast. Granger and Newbold (Granger, C., P. Newbold. 1977. Forecasting Economic Time Series. Academic Press, New York.) have presented this method as one whereby an “optimal” forecast can be obtained. Makridakis and Winkler (1966) and Winkler and Makridakis (Winkler, R., S. Makridakis. 1983. The combination of forecasts: some empirical results. J. Roy. Statist. Soc., Ser. A 146 150–157.) have presented results to support this claim and Mahmoud (Mahmoud, Essam. 1984. Accuracy in forecasting: a survey. J. Forecasting 3 139–159.) has reviewed over 20 articles all claiming that combined forecasts out perform single model forecasts. This paper extends this topic in a number of directions. First a section on motivation provides additional reasons for combining forecasts. Combination problems are then discussed in §2, observations and evaluations of the problem presented are discussed in §3 and concluding remarks are contained in §4.
Aggregating Subjective Forecasts: Some Empirical Results
Authors: Ashton Alison Hubbard , Ashton Robert H.
Published: November 2008

The impact on forecast accuracy of aggregating the subjective forecasts of up to 13 individuals was examined for five forecast weighting methods—equal weighting, two ex post methods that took advantage of prior information about the individuals' relative accuracy, and two ex ante methods based on objective and subjective assessments of relative accuracy. The individuals were executives, managers and sales personnel employed by Time. Inc., and the variable forecasted was the number of advertising pages sold annually by Time magazine over a 14-year period. The results show that both the average forecast error and the variance of the error decrease as additional individuals' forecasts are included in the aggregate. Only two to five individuals' forecasts must be included to achieve much of the total improvement available from combining all 13 forecasts. Three of the differential weighting methods produced more accurate forecasts than equal weighting, but the magnitude of the improvement was small. Implications for realistic forecasting situations are discussed, as are conditions under which the use of aggregates seems attractive.
Note—A Note on the Use of the CAPM as a Strategic Planning Tool
Authors: Boardman Anthony E. , Carruthers Norman E.
Published: November 2008

A recent paper by Naylor and Tapon (Naylor, Thomas H., Francis Tapon. 1982. The capital asset pricing model: an evaluation of its potential as a strategic planning tool. Management Sci. 28 1166–1173.) showed that the capital asset pricing model (CAPM) can be an important strategic planning tool, but their specific strategic suggestions were incorrect. The proper conclusion to draw from the CAPM is that a company should purchase a business if its expected return exceeds the expected return in equilibrium of a business in the same risk class. In the absence of synergy, each potential acquisition should be evaluated on its own merit, independent of the other businesses in a company's portfolio. When all firms are in equilibrium, no gain may be made from merger or takeover.
Note—A Note on Computing Periodic Inspection Policies
Authors: Schultz Carl R.
Published: November 2008

Certain systems must be inspected in order to discover failures that would otherwise go undetected. Periodic inspection is the most commonly used inspection policy and is the optimal policy form for some inspection models. Determining the optimal periodic inspection interval, however, would involve a numerical search and require knowledge of the underlying failure distribution. This note examines the cost performance of an existing simple approximation of the optimal inspection interval and presents a new approximation. The new approximation is computationally simple, and outperforms the existing approximation. The new approximation yields expected total costs that are typically well within one percent of optimal.
Control: Organizational and Economic Approaches
Authors: Eisenhardt Kathleen M.
Published: November 2008

Organizational design often focuses on structural alternatives such as matrix, decentralization, and divisionalization. However, control variables (e.g., reward structures, task characteristics, and information systems) offer a more flexible approach. The purpose of this paper is to explore these control variables for organizational design. This is accomplished by integration and testing of two perspectives, organization theory and economics, notably agency theory. The resulting hypotheses link task characteristics, information systems, and business uncertainty to behavior vs. outcome based control strategy. These hypothesized linkages are examined empirically in a field study of the compensation practices for retail salespeople in 54 stores. The findings are that task programmability is strongly related to the choice of compensation package. The amount of behavioral measurement, the cost of measuring outcomes, and the uncertainty of the business also affect compensation. The findings have management implications for the design of compensation and reward packages, performance evaluation systems, and control systems, in general. Such systems should explicitly consider the task, the information system in place to measure performance, and the riskiness of the business. More programmed tasks require behavior based controls while less programmed tasks require more elaborate information systems or outcome based controls.
Modeling Data and Process Quality in Multi-Input, Multi-Output Information Systems
Authors: Ballou Donald P. , Pazer Harold L.
Published: November 2008

This paper presents a general model to assess the impact of data and process quality upon the outputs of multi-user information-decision systems. The data flow/data processing quality control model is designed to address several dimensions of data quality at the collection, input, processing and output stages.

Starting from a data flow diagram of the type used in structured analysis, the model yields a representation of possible errors in multiple intermediate and final outputs in terms of input and process error functions. The model generates expressions for the possible magnitudes of errors in selected outputs. This is accomplished using a recursive-type algorithm which traces systematically the propagation and alteration of various errors. These error expressions can be used to analyze the impact that alternative quality control procedures would have on the selected outputs.

The paper concludes with a discussion of the tractability of the model for various types of information systems as well as an application to a representative scenario.
Note—Finding Certain Weakly-Efficient Vertices in Multiple Objective Linear Fractional Programming
Authors: Benson Harold P.
Published: November 2008

Recently Kornbluth and Steuer have developed a simplex-based algorithm for finding all weakly-efficient vertices of an augmented feasible region of a multiple objective linear fractional programming problem. As part of this algorithm, they presented a method for detecting certain weakly-efficient vertices called break points. In this note we show that the procedure used by Kornbluth and Steuer in this method for computing the numbers needed to find these break points may sometimes fail. We also propose a fail-safe method for computing these numbers and give some computational results with this method.
Note—Multi-Activity Facility Design and Location Problems
Authors: Akinc Umit
Published: November 2008

This paper considers the problem of optimally locating multi-activity facilities whose activity compositions are also to be determined. It is assumed that there are fixed costs associated both with establishing facilities and with including specific activities at the locations. This problem is examined under alternative assumptions concerning the facility capacities. Efficient branch-and-bound algorithms are developed, and extensive computational results are given.
The Managerial Economics of Civil Litigation
Authors: Levy Ferdinand K.
Published: November 2008

As the United States has become a more litigation society, executives are finding more of their time and their firms' resources consumed by litigation. This paper attempts to assist their decision making with regard to legal matters by looking at the following questions: Under what conditions should a potential plaintiff litigate a specific issue? Under what conditions should a defendant faced with a lawsuit respond forcefully to it? How can legal expenses be budgeted and controlled by both sides? What are the most likely conditions under which both plaintiff and defendant would be willing to seek out of court settlement?

The research determines the economic requisites of both a plaintiff's decision to litigate an issue and the corresponding defendant's decision on how to respond to the suit. These decisions are viewed as both commensurate and competitive with other managerial operating decisions, e.g., capital budgeting and market expansion, that make demands upon the firm's resources. Models from economics and learning theory are employed both to illustrate the relationship between expenditures on a civil suit and the probability of success and to show how litigation costs should be budgeted and controlled.

The research also shows both the conditions under which it is advantageous for both sides to seek an out of court settlement and the means to estimate the probability of out of court settlements in civil litigation in general. This latter is shown under the most general conditions to be a minimum of 0.66 and to rise as the participants in the litigation become more risk averse.
Implicit Understandings in Channels of Distribution
Authors: Shugan Steven M.
Published: November 2008

Formal agreements can be used to achieve coordination among channel members. These agreements work by exerting explicit control over the members who make the agreements. However, implicit understandings can be used as a partial substitute for more formal agreements. In this paper, we show that implicit understandings can develop as channel members learn about each other's behavior.

We show that … This learning leads to the use of the implicit influence each channel member has over the other's behavior. The learning leading to an implicit understanding requires some form of experimentation or historical observation. This learning results in an oscillating retail price. When only one channel member learns the other's behavior, both channel members obtain greater profits than when neither member learns, and both channel members obtain less profits than when both members learn. However, the member who does not learn obtains more profits than the member who learns.

We also show that … Implicit understandings result in greater channel profits than in their absence. Implicit understandings cannot fully substitute for an explicit contract. Implicit understandings result in a retail price which is higher than the price resulting from an explicit contract but lower than the price resulting in the absence of an implicit understanding. Implicit understandings develop as channel members learn each other's behavior.

We demonstrate that the form of learning discussed in this paper is consistent with a somewhat general demand function. Finally, the paper provides some examples of both symmetrical learning, where both channel members learn at the same speed and asymmetrical learning where channel members learn at different speeds.
The Best Order for Queues in Series
Authors: Whitt Ward
Published: November 2008

An important design problem for queueing systems is to determine the best order for two or more service stations in series. For given external arrival process and given service-time distributions, the object is to determine the order of the stations (to be used by all customers) that minimizes the expected equilibrium sojourn time per customer. Unfortunately, very little is known about this problem because exact analysis is extremely difficult. This paper applies approximation methods recently developed for networks of queues to obtain approximation formulas and useful heuristic design principles.
Note—The Capital Asset Pricing Model and Strategic Planning
Authors: Wernerfelt Birger
Published: November 2008

We make two clarifying comments on a recent paper by Naylor and Tapon (Naylor, T. H., F. Tapon. 1982. The capital asset pricing model: An evaluation of its potential as a strategic planning tool. Management Sci. 28 1166–1173.). The conclusions of their paper are significantly affected by this.
Note—The Capital Asset Pricing Model and Strategic Planning: Response to Wernerfelt
Authors: Naylor T. H. , Tapon F.
Published: November 2008

A response to Wernerfelt, B. 1983. The capital asset pricing model and strategic planning. Unpublished paper, Graduate School of Business Administration, University of Michigan, October.
Kidney Transplantation: A Simulation Model for Examining Demand and Supply
Authors: Ruth R. Jean , Wyszewianski Leon , Herline Gary
Published: November 2008

In most regions of the United States there is a serious imbalance between the number of kidneys donated for transplantation and the number of persons wishing to receive a transplant. This not only affects the quality of life of those unable to obtain a transplant, but it also has important repercussions on the large and rapidly growing federal expenditures for the treatment of end-stage renal disease by transplantation and dialysis. A simulation model was constructed to assess the impact that changes in the number of cadaveric kidneys donated in Michigan would have on the waiting list of potential kidney transplant recipients in the state. The model represents the process of matching donated kidneys to people on the waiting list, taking into account the compatibility of the donor with the potential recipient's blood type and the tissue compatibility of the recipient to the donor as estimated by cytotoxicity. We describe the structure and data needs of the model, and we discuss the results obtained for Michigan. It was found that, under the current conditions, the waiting list would continue to grow rapidly. The number of donors needed to compensate for this growth would have to be disproportionately large: as the number of donations increases the effect of each donation in reducing the waiting list is less. The approach is applicable to other regions and it should also be adaptable to other types of organ transplants that require tissue compatibility, once such transplants become common enough to warrant regional coordination of the matching of recipients with donors.
General Economic Equilibrium as a Unifying Concept in Energy-Economic Modeling
Authors: Weyant John P.
Published: November 2008

In the pristine model of general economic equilibrium producers and consumers are assumed to take prices for their inputs and outputs as given. A market equilibrium solution is obtained when the prices of all products lead to equal amounts of supply and demand for each. The mathematical properties of this model provide a rich and powerful unifying foundation for much of modern microeconomic theory. However, in many practical applications it is difficult or impossible to develop the data, and formulate and solve the equations required to implement the model of general economic equilibrium in its most general form. In practice, generality of formulation is often sacrificed for ease of computation and interpretation. These tradeoffs allow the latest breakthroughs in optimization algorithms and computer technology to be applied in the analysis of important societal problems.

A potential drawback associated with this otherwise desirable trend is that the analysis could become infatuated with the use of particular algorithms, and lose sight of the restrictive simplifying assumptions they imply. The present paper includes a comparison of the simplifying assumptions required in four of the most popular types of energy-economic models with respect to the model of general economic equilibrium. This comparison helps sharpen our appreciation for the tradeoffs between generalization of formulation and ease of computation and interpretation that are available.

The concept of general economic equilibrium is employed to provide a common framework for four ostensibly different approaches to large-scale modeling: (1) variable-coefficient input-output theory, (2) process network methodology, (3) linear programming and (4) general nonlinear optimization. The similarities and the differences of the four approaches are isolated within this framework. This comparison makes both the absolute and the relative strengths and weaknesses of the models more transparent.
Scheduling the General Job-Shop
Authors: Barker Jeffrey R. , McMahon Graham B.
Published: November 2008

A family of algorithms is described for finding optimum schedules for job-shops. The algorithms are of a branch and bound type but have a complete schedule associated with each node of the search tree. Branching from nodes is based on important conflicts in the schedule. Some results are provided.
Budgeting Costs of Nursing in a Hospital
Authors: Kao Edward P. C. , Queyranne Maurice
Published: November 2008

This paper examines issues in building decision support models for budgeting nursing workforce requirements in a hospital. We determine regular-time, overtime, and agency workforce levels for various skill classes in a budget cycle. We introduce a family of eight models ranging from a single-period, aggregate and deterministic model to a multiperiod, disaggregate and probabilistic model. In a single-period model, we ignore the time-varying nature of demand for nursing hours. Aggregation is done over the nurse skill class mix. For probabilistic models, we consider demand uncertainty. Using empirical data, we evaluate the effects of level of sophistication in model building and in information requirements on their relative performances. The results suggest that ignoring the time-varying nature of demand does not induce gross errors in budget estimates. However, ignoring demand uncertainty produces underestimates (about five to six percent) of budget needs—a consequence of a Madansky (Madansky, A. 1960. Inequalities for stochastic linear programming problem. Management Sci. 6 197–204.) inequality. It also induces added costs to the system due to implementing nonoptimal regular-time workforce levels. Finally, we find that a simple formula using a single-period demand estimate gives excellent approximations to the budget estimates obtainable from the more precise models.
An Analysis of Optimal Advertising Under Uncertainty
Authors: Nguyen Dung
Published: November 2008

We examine the firm's optimal advertising behavior under conditions of uncertainty. For the static one-period model, we show that the firm's attitude toward risk may be responsible for the potential divergence between advertising decisions under uncertainty and those under deterministic conditions. For the dynamic multi-period model, the ultimate impact of uncertainty on advertising is further complicated when the sales response function contains an unknown parameter, and the firm wishes to gain more information about it through experimentation. We demonstrate that whether it is optimal for the firm to experiment at an advertising rate higher, equal to, or lower than the myopic (one-period) level would depend on the specification of the response function. Finally, we offer some empirical evidence for our assumption of a quadratic sales response function, using time-series data of twelve major brands of cigarettes.
Note—Performance Bounds for Lot Sizing Heuristics
Authors: Axsäter Sven
Published: November 2008

This paper deals with the classical dynamic lot size problem without backlogging and capacity limitation. We derive worst case performance bounds for a class of lot sizing heuristics. When the considered methods are applied a decision whether to have a set-up or not in a certain period is taken without regarding the future demand. It is shown that 2 is a lower bound for the worst case performance ratio for such heuristics. The results illustrate circumstances under which the approximate techniques fail.
Sequential Hedging
Authors: Krasker William S.
Published: November 2008

This paper addresses a problem faced by the producer of a commodity for which futures are traded. The producer wishes to reduce his exposure to the random fluctuations in spot prices; however, the futures markets extend out for fewer time periods than the revenue stream that he wants to hedge. The main result of the paper is that under certain conditions on the relationship between the futures prices and past spot prices, it is still possible to hedge perfectly; in other words, there exists a sequence of futures positions that entirely eliminates the risk in the present value of the producer's revenues. Under those conditions—which are necessary as well as sufficient—the paper shows explicitly the futures positions that achieve the exact hedge.
Job Completion Based Inventory Systems: Optimal Policies for Repair Kits and Spare Machines
Authors: Mamer John W. , Smith Stephen A.
Published: November 2008

In this paper, we consider multi-item inventory systems that contain repair kits of spare parts and tools and may include an inventory of spare machines as well. Demands occur in the form of field repair jobs, each requiring some collection of parts and tools for completion. If any required part or tool is not in the repair kit, the repair job is “broken.” The penalty or inconvenience cost is assumed to be proportional to the number of broken jobs, regardless of the number of items short. Previous work on job completion based systems is summarized and new results for the optimal solutions are derived. A more general job completion based system is also analyzed, which allows a pool of spare machines to be used to satisfy demands which cannot be met with the repair kits. Techniques are presented for optimizing the trade-off between the inventory cost of repair kits plus spare machines and the overall level of service.
(S − 1, S) Policies for Perishable Inventory
Authors: Schmidt Charles P. , Nahmias Steven
Published: November 2008

We consider (S − 1, S) policies for a single item whose lifetime is fixed and known with certainty. Demands are generated by a stationary Poisson process and there is a positive leadtime for replenishment. We believe this study gives the only analysis for perishables with a positive order leadtime. The analysis involves the derivation of the stationary distribution of the S-dimensional stochastic process corresponding to the time elapsed since the last S orders were placed. This distribution is then used to obtain an expression for the expected cost rate of operating the system in steady state as a function of S. A computer program has been developed to compute optimal S values and expected annual costs. We report a computation for a variety of system parameters which show some of the unusual features of the problem. Finally, we show how this model can be used in the context of a problem of optimizing availability of operating equipment subject to scheduled maintenance as well as random failure.
Approximations for a Lost-Sales Production/Inventory Control Model with Service Level Constraints
Authors: de Kok A. G.
Published: November 2008

This paper deals with a one-product production/inventory model, where the production rate can be dynamically adjusted in order to cope with random fluctuations in demand. The inventory level is controlled by using one of two possible production rates where under each production rate the production is continually added to the inventory. The demand process for the product is described by a compound Poisson process. Also, excess demand is lost. In accordance with common practice we consider service measures as the average number of lost-sales occurrences per unit time and the fraction of demand that is lost. For a two-critical-number control rule we derive practically useful approximations for the switch-over level in order to achieve a prespecified service level. Numerical experiments reveal that the approximations are quite accurate.
A New Measure of Attributable Risk for Public Health Applications
Authors: Cox Louis A.
Published: November 2008

A persistent conceptual problem in the theory of risk accounting and risk analysis methodology is that of allocating or attributing a risk among the joint causes or “factors” producing it. When multiple factors interact, the especially difficult problem of “risk externalities” arises. Drawing on related work in the mathematical theory of games that seeks solutions to similar philosophical and conceptual problems, this paper proposes a method for solving the risk attribution problem. The proposed solution is justified on the grounds that it is the unique risk attribution function satisfying three reasonable principles, or “axioms,” of risk accounting. A mathematical framework for formulating risk attribution problems, and several possible applications, are also discussed.
An Adaptive Filtering Procedure for Estimating Regression Quantiles
Authors: Gorr Wilpen L. , Hsu Cheng
Published: November 2008

Applications of reliability theory and some forms of chance-constrained programming need real-time, nonstationary estimates of regression quantiles to trigger preventive actions, thereby avoiding undesirable system states. We have designed the Quantile Estimation Procedure (QEP) for this purpose. QEP is a new adaptive filter that nonparametrica11y estimates time-varying parameters of multivariate regression quantiles. Results of Monte Carlo tests show that QEP provides accurate estimates for a range of stochastic processes. Falling within this range is the case study of this paper on monitoring compliance with short-term air quality standards.
Heuristics in an Air Pollution Control Cost Model: The “AIRCOST” Model of the Electric Utility Industry
Authors: Silverman Barry G.
Published: November 2008

A number of uncertainties associated with national air pollution policy are currently being analyzed by the United States Congress, the Environmental Protection Agency (EPA), and the Department of Energy (DOE) with the aid of a large-scale model of electric utility plant emissions under the 1983 Clean Air Act Amendments called AIRCOST.

The AIRCOST methodology combines a “supply side” economics approach with detailed plant by plant models that result in substantial spatial and technological resolution. In fact, the resulting emissions projections are being used as input to separate air pollution transport models for the evaluation of "acid rain" impacts. This paper documents and partially validates this methodology with which a critical segment of U.S. air pollution policy has been and is continuing to be analyzed.
Subjective Stochastic Dominance, Put Writing, and Stock Purchases with Extensions to Option Pricing and Portfolio Composition
Authors: Henin Claude G. , Rentz William F.
Published: November 2008

Initially an investor has the choice of two risky assets, writing a European put option or buying the underlying share. Under broad conditions a risk averse investor will be subjectively better off writing the put. When homogeneous expectations are invoked, an upper bound for the put premium is obtained. A numerical example using the lognormal density function illustrates the broad conditions for risk-averters subjectively preferring the put writing strategy. Additional conditions permit this preference for writing puts to be extended to the portfolio context. Transactions costs only reinforce this preference in the one-period horizon considered.
The Dynamics of Prices and Market Shares Over the Product Life Cycle
Authors: Wernerfelt Birger
Published: November 2008

We analyze a duopoly through a differential game, in which the players set prices as functions of time. Under reasonable assumptions, we find that prices first decline, then increase. The market share of the biggest firm grows initially but decreases later. It is demonstrated that a firm may growth maximize early, but never late, in the product life cycle. Finally we show that only the low price firm will pay for informative advertising, whereas both firms will pay for persuasive advertising, though less if their market shares are very different.
The Effects of Task Size and Similarity on the Decision Behavior of Bank Loan Officers
Authors: Biggs Stanley F. , Bedard Jean C. , Gaber Brian G. , Linsmeier Thomas J.
Published: November 2008

Research on decision-making behavior has shown that decision strategies used by individuals are contingent upon the characteristics of the task. For example, as the task size (i.e., the number of alternatives and/or the number of dimensions describing each alternative) increases, individuals tend to quickly eliminate alternatives that do not meet a criterion level for any dimension (i.e., they adopt a noncompensatory decision strategy, in which a high value on one dimension cannot offset or compensate for a low value on another dimension). Most of this research has involved consumers making buying decisions. The purpose of the research reported here was to determine if contingent decision behavior extends to experts (experienced bank loan officers) making business decisions (loan decisions). In this study two task characteristics (task size, and similarity of loan profiles describing alternatives) were varied in a bank loan decision context. Two process tracing methods (information boards and think-aloud verbal protocol analysis) were used to obtain evidence of how eleven bank loan officers made choices among alternative loan candidates. Of particular interest was the effect that changes in task characteristics had on loan officers' decision strategies. The results indicated that when faced with tasks of increasing size, loan officers adapted their behavior in a manner consistent with an increased use of noncompensatory decision strategies. In contrast, when the loan profiles of candidate companies were similar loan officers exhibited an increased use of compensatory strategies. It was also found that when both the task size and similarity of alternatives were varied loan officers adapted their behavior as if they processed these characteristics serially. These results indicate that contingent behavior associated with the two types of task characteristics may be quite different. A priori, there was reason to believe that expert loan officers would not exhibit contingent decision behavior. The fact that their decision strategies were contingent upon task characteristics has important implications for managerial practice and research. First, the results have design implications for information and decision support systems for lending institutions. Second, future research should investigate the consequences of serial processing of task characteristics.
Optimization of Bank Transit Check Clearing Operations
Authors: Nauss Robert M. , Markland Robert E.
Published: November 2008

The passage of the Depository Institutions Deregulation and Monetary Control Act of 1980 has created a major change in the banking system of the United States, in that the Federal Reserve began charging for its check clearing and collection services September 1, 1981. The result from the passage of this legislation has been major changes in bank check clearing arrangements, in that greater check clearing efficiency is now required to offset the increased clearing costs. This paper describes the development of an integer programming model which has been used to determine the set of clearing arrangements and associated transportation connections that optimizes a bank’s transit check clearing system in this new environment.
Consumption Experience and Sales Promotion Expenditure
Authors: Fornell Claes , Robinson William T. , Wernerfelt Birger
Published: November 2008

An economic theory of habit formation through consumption learning is developed to explain order differences in relative sales promotion expenditures among brands. The theory applies to consumer brands in equilibrium markets, where consumer information from sources other than advertising, sales promotion, and previous consumption experience is negligible.

Three propositions are derived from the theory: brands with more consumption experience (1) spend proportionately less on sales promotion as well as (2) on advertising and promotion combined, and (3) place proportionately more emphasis on advertising relative to sales promotion. These propositions are formulated as hypotheses and tested against empirical data from the PIMS project. It is found that the data are generally consistent with the propositions. In order to examine the robustness of the results, the hypotheses are subjected to three different empirical tests, each with different assumptions. The findings are shown to be reasonably robust with respect to these changes in assumptions.
Research Opportunities in the Decision and Management Sciences
Authors: Little John D. C.
Published: November 2008

The National Science Foundation established the Decision and Management Sciences Program (DMS) in 1982. Healthy and growing, DMS is likely to affect OR/MS significantly, not only by providing funds for basic research, but also through its vision of a combined theoretical and empirical science of operational and managerial processes, and by its policy of bringing together different disciplines within the program. An NSF workshop held in Dallas in April 1984 sought to identify research opportunities in the decision and management sciences. Promising areas, many of them inviting cross-disciplinary research, appear in the development of measurement-based models for operational processes (both natural and designed and including organizational and managerial activities), choice theory (individual and group choice, values, judgment, and risk behavior), decision support, and the treatment of complexity. Increased knowledge in any of these areas would be likely to have a valuable long-run impact on management practice.
Piecewise Loglinear Estimation of Efficient Production Surfaces
Authors: Banker Rajiv D. , Maindiratta Ajay
Published: November 2008

Linear programming formulations for piecewise loglinear estimation of efficient production surfaces are derived from a set of basic properties postulated for the underlying production possibility sets. Unlike the piecewise linear model of Banker, Charnes, and Cooper (Banker R. D., A. Charnes, W. W. Cooper. 1984. Models for the estimation of technical and scale inefficiencies in data envelopment analysis. Management Sci. 30 (September) 1078–1092.), this approach permits the identification of increasing marginal products, and estimation of the classical S-shaped production functions. Methods are also provided for estimating technical inefficiencies and other production characteristics, such as rates of substitution and transformation, marginal products, returns to scale and most productive scale sizes on the basis of observed production data. The results of a simulation study are reported to illustrate the usefulness of this estimation method in empirical applications when there are a priori reasons to expect increasing marginal products in some regions of the production function. A modified model is provided to extend this analysis to the situation of non-competing outputs addressed by the bi-extremal model of Banker, Charnes, Cooper, and Schinnar (Banker R. D., A. Charnes, W. W. Cooper, A. Schinnar. 1981. A bi-extremal principle for frontier estimation and efficiency evaluation. Management Sci. 27 (December) 1370–1382.).
An Analysis of Risk and Return in the Defense Market: Its Impact on Weapon System Competition
Authors: Greer Willis R. , Liao Shu S.
Published: November 2008

With growing austerity pressures from the Administration, Congress, and the general public, the Government's procurement policy has called for increased use of dual-source competition as a means of reducing acquisition costs. In practice, however, this policy has produced mixed results. The cause seems to be an inadequate understanding of the peculiarities of competition in the Government's market. This paper examines the risk and return available in the defense market, and relates it to the industry's propensity to compete. The results show that intelligent observation of the industry's capacity utilization rate would contribute to the development of a more efficient acquisition policy.