bluuebunny/crossref_metadata_2025 huggingface dataset:
Efficient Corporate Diversification: Methods and Implications
Authors: Amit Raphael , Livnat Joshua
Published: November 2008

This study develops and tests a measure of efficient corporate diversification (ECD) that compares the variability of a firm’s revenues with the variability of a minimum-variance portfolio of businesses that maintain the same sales growth rate. According to ECD, which incorporates the exposure of a firm to business cycle fluctuations, a firm is considered more efficient the higher its ratio of minimum variance to the realized variance.

The empirical results indicate that efficient diversifiers manage to reduce the variability of their returns without sacrificing profitability. Moreover, such firms have a more favorable trade-off between risk and return in the equity market. Further, efficient diversifiers are found to be less diversified as measured by the extent of operations in different SIC industries. Instead, they operate in related business segments that have differential responses to business cycle changes and thereby enjoy the benefits from related diversification while minimizing their operating risk.
Note—An Early Classic Misplaced: Ford W. Harris's Economic Order Quantity Model of 1915
Authors: Erlenkotter Donald
Published: November 2008

The familiar square-root formula for the optimal economic order quantity was derived originally by Harris in 1915 (Harris, F. W. 1915. What quantity to make at once. The Library of Factory Management, Vol. V. Operation and Costs. A. W. Shaw Company, Chicago, 47–52.). Since all citations found to Harris's paper over the past 35 years are incorrect, it seems that no one has been able to locate the paper during this period. The paper's apparent misplacement probably stems from an inaccurate citation given by Raymond in 1931 (Raymond, F. E. 1931. Quantity and Economy in Manufacture. McGraw-Hill, New York.). Harris's paper exemplifies skillful presentation of the concepts of management science, and still merits reading. Today's researcher can learn much from Harris's modeling approach, and would do well to emulate his expositional clarity and motivational effectiveness.
Generalized Assignment with Nonlinear Capacity Interaction
Authors: Mazzola Joseph B.
Published: November 2008

The utility of the generalized assignment problem (GAP) is well known in regard to resource allocation problems arising in the areas of production planning, scheduling, and facility location. This paper introduces an important generalization of the GAP, which is called the 0-1 generalized assignment problem with nonlinear capacity constraints (NLGAP) and which allows for capacity interaction among tasks assigned to the same agent. For example, NLGAP can be used to model the hierarchical production planning problem involving the assignment of product families to production facilities in the case where process changeover gives rise to nonlinear capacity interaction among product families assigned to be produced at the same facility. Other applications of NLGAP occur readily throughout the areas of production planning and scheduling.

We define a branch-and-bound algorithm for the NLGAP. This algorithm draws upon the underlying structure of the problem by combining in a novel manner recent advances in both nonlinear 0-1 programming and bounding techniques for the GAP. A heuristic for obtaining approximate solutions to NLGAP is also defined. We discuss computational experience with both the exact algorithm and the heuristic. The computational results demonstrate that the heuristic is extremely effective in obtaining near-optimal solutions and that the branch-and-bound algorithm can solve to optimality NLGAPs with 5 agents, 20 tasks, and over 1000 nonlinear terms per constraint.
Strategic Orientation of Business Enterprises: The Construct, Dimensionality, and Measurement
Authors: Venkatraman N.
Published: November 2008

This paper reports the results of a research study aimed at conceptualizing and developing valid measurements of key dimensions of a strategy construct—termed Strategic Orientation of Business Enterprises. This construct is first defined by addressing four theoretical questions of scope; hierarchical level; domain; and intentions versus realizations, and then conceptualized in terms of six dimensions. Subsequently, operational indicators are developed for the six dimensions in terms of managerial perceptions across 200 business units in a field study. An evaluation of the measurement properties within an analysis of covariance structures framework indicated that the operational measures developed here largely satisfy the criteria for unidimensionality, convergent, discriminant, and predictive validity. Implications and lines of extensions are outlined.
Defining Managerial Problems: A Framework for Prescriptive Theorizing
Authors: Smith Gerald F.
Published: November 2008

Reflective problem solving activity presumes the existence of a problem definition or representation, often the precursor of a formal model. Although problem definition has been addressed by theorists from several disciplines, it has not been adequately conceptualized, limiting the potential value of descriptive and prescriptive research. This article places problem definition in the overall problem solving process and delineates the various ways in which problems are commonly defined. It identifies the central dilemma of problem definition and proposes a prescriptive framework responding to that dilemma.
Perceptual Position and Competitive Brand Strategy in a Two-Dimensional, Two-Brand Market
Authors: Carpenter Gregory S.
Published: November 2008

Brand positioning and competitive reaction are important determinants of optimal brand strategy. Analyses of brand strategy have focused on optimal pricing and positioning issues using either empirical models of perceptions and preferences, game theory to examine competition, or both. However, the important issues of advertising and distribution strategy have not been fully addressed. This paper analyzes competition and strategy between two brands that compete in a two-dimensional market with advertising and distribution spending, in addition to prices and product positions. In particular, for a unimodal taste distribution of ideal points we show how

• optimal competitive (Nash equilibrium) marketing mix levels and profits depend on the positions of both brands,

• brands can reposition to increase profit and under what conditions these strategies imply minimum versus maximum differentiation positioning equilibria, and

• how the intensity of advertising and distribution competition affect equilibrium brand positions.
The Tolerance Approach to Sensitivity Analysis of Matrix Coefficients in Linear Programming
Authors: Ravi N. , Wendell Richard E.
Published: November 2008

The tolerance approach to sensitivity analysis allows for simultaneous and independent variations of the elements of a column or a row of the coefficient matrix in a standard linear programming problem. In particular, the approach yields a maximum tolerance percentage within which the elements of a column may all vary simultaneously and independently from their estimated values while still retaining the same set of basic variables in an optimal solution. A similar result is also derived for the perturbations of the elements of a row.
Dependability and Organizational Bankruptcy: An Application of Agency and Prospect Theory
Authors: D'Aveni Richard A.
Published: November 2008

This paper proposes and tests a new model of organizational bankruptcy based on agency and prospect theory. The paper argues that debtors with unprestigious top managers, low liquidity and high leverage signal that they will be undependable exchange partners. The model proposes that survival is contingent on maintaining an acceptable, minimum level of these financial and managerial assets. If a firm falls below that threshold level, it has a higher probability of bankruptcy because creditors withdraw their financial support from the debtor. Consistent with agency theory, this implies that bankruptcy can be viewed as the legal resolution of severe shareholder-creditor conflicts about the levels of financial and managerial assets that the debtor should maintain.

This new model proposes that maintaining a minimum level of these assets is a necessary, but not sufficient, condition for bankruptcy. Some undependable firms delay bankruptcy by using strategies that create the hope that they will become dependable in the future. According to prospect theory, these strategies work because creditors wish to avoid recognizing significant losses, and thus take on more risk than they might otherwise assume.
Note—A Note on the Minimization of Mean Squared Deviation of Completion Times About a Common Due Date
Authors: De Prabuddha , Ghosh Jay B. , Wells Charles E.
Published: November 2008

This paper points out a conceptual flaw present in a recent publication. It shows how the methodology can be modified to correct this flaw. It also presents improved bounds to determine the nature of a given problem.
A Theoretical Assessment of the User-Satisfaction Construct in Information Systems Research
Authors: Melone Nancy Paule
Published: November 2008

For nearly two decades, the user-satisfaction construct has occupied a central role in behavioral research in Information Systems (IS). In industry, the construct has often been used as a surrogate for IS effectiveness. Given its widespread use by both academics and practitioners, it is surprising that no comprehensive theoretical assessment of this construct has been performed. This paper provides such a review. It begins by examining conceptual and theoretical limitations of the construct's use as a measure of IS effectiveness. Attention is then focused on the evolution of the construct in the literature and the theoretical problems associated with its broader use. The fundamental similarity between user satisfaction and the social and cognitive psychologists' notion of an attitude is suggested. The next sections focus on a discussion of attitude structures and function. First, alternative theoretical views on attitude structure are presented. While one of these structures, the family of expectancy-value models, is reflected in current research on user satisfaction, the second, the family of cognitive approaches, is not. The two attitude structures are considered from the perspective of possible refinements to future work in IS. Next, an examination is made of the ways in which these structures have been integrated in terms of understanding the relationship of users' affective responses to other responses (i.e., behavior or cognition). This leads to a discussion of the function attitudes might serve for the user other than the evaluation of an information system or IS staff. Finally, the question of how behavior influences attitude is considered. The paper concludes with suggestions for future work.
Determinants of Financial Performance: A Meta-Analysis
Authors: Capon Noel , Farley John U. , Hoenig Scott
Published: November 2008

A meta-analysis of results from 320 published studies relates environmental, strategic and organizational factors to financial performance. Some factors (e.g., concentration and growth) have been studied widely and have a relatively consistent positive impact on performance. Other widely-studied factors (e.g., size) have few consistent effects. Many factors (particularly organizational variables) are understudied. We suggest implications for research and management practice.
Environment, Market Share, and Market Power
Authors: Boulding William , Staelin Richard
Published: November 2008

In this paper we develop a process model relating market share to firm profits. In particular, we specify average price and average cost equations as a function of previous year market share position, changes in market share, environmental conditions, and interactions of environmental conditions with the lagged market position and market share change variables. We estimate these equations using PIMS data after controlling for unobservable factors. Our results suggest that firms with high market shares derive no extra market power benefits except if they operate in environments with little buyer power. Instead, environmental factors and changes in market share most strongly influence price and cost. An analysis of the market share associated with maximal firm profits indicates that for the majority of firms in our sample steadily increasing market share does not always associate with increasing profits, giving credence to the proposition that “more market share is not always better.”
Firm-Level Productivity and Management Influence: A Comparison of U.S. and Japanese Automobile Producers
Authors: Lieberman Marvin B. , Lau Lawrence J. , Williams Mark D.
Published: November 2008

This study compares the productivity of six major US and Japanese motor vehicle manufacturers—General Motors, Ford, Chrysler, Toyota, Nissan and Mazda—from the early 1950's through 1987. Techniques of productivity measurement, conventionally applied at the level of industries or national economies, are adapted for the analysis of individual firms. Several potential determinants of growth in productivity are evaluated, including economies of scale, adoption of “just-in-time” manufacturing, and changes in top management.

The results show that productivity improvement by the six motor vehicle producers was attained primarily through more efficient utilization of labor; long-term growth in capital productivity was negligible for most firms. The three Japanese producers had achieved higher labor productivity than their US counterparts by the late 1970's. More recently, though, differences among firms within each country have become large relative to the gap between the US and Japan. Early productivity growth for Japanese producers was derived in part from the achievement of scale economies, but this source of improvement was largely exhausted by the mid-1960's. In both countries, significant shifts in the growth rate and level of firm productivity have followed changes in top management.
The Cooperative Venture Formation Process: A Latent Variable Structural Modeling Approach
Authors: Fornell Claes , Lorange Peter , Roos Johan
Published: November 2008

This article addresses management process issues for forming cooperative ventures with an increased likelihood of subsequent success. Based on Roos (1989) the cooperative venture formation process is conceptualized in terms of three theoretical constructs: the extent of sufficient “internal push” for the project, the breadth and depth of “analytical scope,” and the strength of key “stakeholder support.” These constructs are related to subsequent perceived performance. Data from sixty seven firms were collected and analyzed via latent variable structural modeling a partial least square (PLS).

One key contribution of this article is the modeling approach to strategic formation process. It contributes to an existing, but not very well developed, theory regarding strategy formation processes.

The PLS method used in this study is quite unique within strategy research. As such, it contributes to methodology development in the strategy research field.

The main managerial implication is that the process by which a cooperative venture is formed should largely be seen as a step-by-step approach—not a discrete decision. If the three fundamentals discussed in the article are thoroughly addressed, we can up the ante for success during implementation and, therefore, subsequent performance.
Competitive Strategies for Late Entry into a Market with a Dominant Brand
Authors: Carpenter Gregory S. , Nakamoto Kent
Published: November 2008

This paper considers optimal positioning, advertising, and pricing strategies for a firm contemplating entry in a market dominated by an entrenched competitor. Drawing on behavioral research on consumer preference formation, we develop an individual-level model that reflects differing consumer responses to similar products offered by the dominant brand and later entrants—an effect we term asymmetric preferences. From the resulting aggregate market response model, we derive several competitive implications, notably (1) that preference asymmetry can make a differentiated late entry strategy optimal even if preferences would appear to dictate otherwise, and (2) that me-too strategies are not equilibrium late entry strategies. More generally, our analysis suggests that preference asymmetry can contribute to the persistent competitive advantage of dominant brands.
The Fair and Efficient Division of the Winsor Family Silver
Authors: Pratt John Winsor , Zeckhauser Richard Jay
Published: November 2008

This is the true story of the actual use of a formal, decentralized division procedure to allocate silver heirlooms among eight grandchildren fairly and efficiently without distasteful direct monetary payments. Each grandchild's stated preferences for objects in contention were roughly represented by a von Neumann-Morgenstern utility function. Allocations were made as they would be in a market for probability shares in the objects, assuming each grandchild had a fixed amount of an artificial currency and made optimal purchases. The market-clearing equilibrium prices were chosen as in a second-price auction to reward honest reporting. Although the procedure was decentralized and most participants did not fully understand it or the preference information desired, it handled all major considerations well and was regarded as equitable.
A Data Envelopment Model for Aggregating Preference Rankings
Authors: Cook Wade D. , Kress Moshe
Published: November 2008

This paper presents a general model for aggregating votes from a preferential ballot. The thrust of the model is to accord each candidate a fair assessment in terms of his overall standing vis-a-vis first place, second place, …, kth place votes. The form of the model is a combined index Σj = 1k Wjvij where vij is the number of the jth place votes received by the ith candidate. The weights Wj are assumed to form a monotonically decreasing sequence with Wj − Wj + 1 ≥ d(j, ε). These constraints correspond to the assurance region (AR) side constraints in the DEA framework. The properties of the model are examined in terms of this discrimination intensity function d, and in the special case that d(j, ε) = ε, our model is shown to be equivalent to the consensus models of Borda and Kendall.
Modelling Emergency Lateral Transshipments in Inventory Systems
Authors: Axsäter Sven
Published: November 2008

In inventory systems with several bases that support different geographical regions, it is quite common to allow emergency lateral transshipments between the bases. This may be advantageous if neighbouring bases are at shorter distances than the central depot or the external supplier. This paper provides a new technique for modelling such lateral transshipments in continuous review inventory systems with one-for-one replenishments and Poisson demand. We apply this technique to a two-echelon system with repairable items.
Subcontracting, Coordination, Flexibility, and Production Smoothing in Aggregate Planning
Authors: Kamien Morton I. , Li Lode
Published: November 2008

We propose a model in which subcontracting can be explicitly considered as a production planning strategy. Possible market and nonmarket subcontracting mechanisms and their costs are discussed. We show that a class of feasible subcontracting mechanisms in which firms coordinate their production via subcontracts Pareto-dominate other mechanisms. We then offer an example with quadratic cost functions and coordination subcontracts; linear decision rules for production, inventory, and subcontracting are derived. In the example, subcontracting reduces the variability in production and inventory. The same interpretation can be used for flexibility of manufacturing resources.
A Unified View of the IPA, SF, and LR Gradient Estimation Techniques
Authors: L'Ecuyer Pierre
Published: November 2008

We study the links between the likelihood-ratio (LR) gradient-estimation technique (sometimes called the score-function (SF) method), and infinitesimal perturbation analysis (IPA). We show how IPA can be viewed as a (degenerate) special case of the LR and SF techniques by selecting an appropriate representation of the underlying sample space for a given simulation experiment. We also show how different definitions of the sample space yield different variants of the LR method, some of them mixing IPA with more straightforward LR. We illustrate this by many examples. We also give sufficient conditions under which the gradient estimators are unbiased.
The Valuation and Analysis of Adjustable Rate Mortgages
Authors: Kau James B. , Keenan Donald C. , Muller Walter J. , Epperson James F.
Published: November 2008

Securities whose payoffs depend upon the actual path of the underlying state variables pose problems for standard backward-valuation techniques. In this paper, we show that there is a method of solving such problems that requires the addition of but a single auxiliary state variable. The technique is illustrated by examining an adjustable rate mortgage (ARM) with yearly and lifetime caps. The ARM amortizes and can be prepaid at any time. We also handle other prominent features of ARMs including points and teasers. This method of using a single auxiliary state variable to handle path dependencies is a general one, applicable to more complex models of the economic environment and to other financial contracts.
User Delay Costs and Internal Pricing for a Service Facility
Authors: Dewan Sanjeev , Mendelson Haim
Published: November 2008

This paper studies optimal pricing and capacity decisions for a service facility in an environment where users' delay cost is important. The model assumes a general nonlinear delay cost structure and incorporates the tradeoff between the delay cost and capacity cost. We find necessary and sufficient conditions for the optimality of a pricing rule that charges out service resources at their marginal capacity cost. We examine the issue of budgetary balance and find that net-value maximization entails a budget deficit for the service facility; that is, the service facility should be evaluated as a “deficit center.” The results provide guidelines under which the optimal magnitude of the deficit can be determined.
Information Technology Implementation Research: A Technological Diffusion Approach
Authors: Cooper Randolph B. , Zmud Robert W.
Published: November 2008

Based on the innovation and technological diffusion literatures, promising research questions concerning the implementation of a production and inventory control information system (material requirements planning: MRP) are identified and empirically examined. These questions focus on the interaction of managerial tasks with the information technology and the resulting effect on the adoption and infusion of that technology.

Using a random sample of manufacturing firms across the United States, we find that this interaction does indeed affect the adoption of MRP, though it does not seem to affect MRP infusion. These results support the notion that though rational decision models may be useful in explaining information technology adoption, political and learning models may be more useful when examining infusion.
The Persistence and Transfer of Learning in Industrial Settings
Authors: Argote Linda , Beckman Sara L. , Epple Dennis
Published: November 2008

The persistence of learning within organizations and the transfer of learning across organizations are examined on data collected from multiple organizations. Results indicate that knowledge acquired through production depreciates rapidly. The conventional measure of learning, cumulative output, significantly overstates the persistence of learning. There is some evidence that learning transfers across organizations: organizations beginning production later are more productive than those with early start dates. Once organizations begin production, however, they do not appear to benefit from learning in other organizations. The implications of the results for a theory of organizational learning are discussed. Managerial implications are described.
Product Positioning Under Price Competition
Authors: Choi S. Chan , Desarbo Wayne S. , Harker Patrick T.
Published: November 2008

This paper presents a consumer-based methodology for new product pricing and positioning in the face of price competition. The price competition is modelled as a Nash equilibrium for which two complementary approaches are employed: an analytical approach of duopoly provides qualitative insights into the competitive behavior, and a numerical approach of general oligopoly provides quantitative solutions under a wide variety of market scenarios. The optimal product positioning is formulated as a Stackelberg-Nash (leader-followers) equilibrium which can be solved numerically using recent advances in the field of variational inequalities. A small example concerning analgesics is used to illustrate this methodology.
On the Effectiveness of Direct Shipping Strategy for the One-Warehouse Multi-Retailer R-Systems
Authors: Gallego Guillermo , Simchi-Levi David
Published: November 2008

We consider the problem of integrating inventory control and vehicle routing into a cost-effective strategy for a distribution system consisting of one depot and many geographically dispersed retailers. All stock enters the system through the depot and is distributed to the retailers by vehicles of limited constant capacity. We assume that each one of the retailers faces a constant, retailer specific, demand rate and that inventory is charged only at the retailers but not at the depot. We provide a lower bound on the long run average cost over all inventory-routing strategies. We use this lower bound to show that the effectiveness of direct shipping over all inventory-routing strategies is at least 94% whenever the Economic Lot Size of each of the retailers is at least 71% of vehicle capacity. The effectiveness deteriorates as the Economic Lot Sizes become smaller. These results are important because they provide useful guidelines as to when to embark into the much more difficult task of finding cost-effective routes. Additional advantages of direct shipping are lower in-transit inventory and ease of coordination.
Economic Lot Scheduling for Multiple Products on Parallel Identical Processors
Authors: Carreno Jose Juan
Published: November 2008

This paper deals with an identical multiprocessor, multiproduct, lot-size scheduling problem under deterministic conditions. The problem is an extension of the single-processor ELSP problem. The objective is to minimize the average production and inventory costs per unit time subject to constraints of no shortages and no interference among the products. A mathematical formulation for the problem is given. A heuristic procedure, which extends the Common Cycle approach for a single processor, is suggested and computational results are reported. Upper and Lower bounds are developed and used to measure the effectiveness of the procedure.
Mean-Variance Approaches to Risk-Return Relationships in Strategy: Paradox Lost
Authors: Ruefli Timothy W.
Published: November 2008

A growing number of articles in the area of strategic management employ a mean-variance approach to risk-return relationships. Some researchers investigating risk-return relationships in this fashion claim to have found negative associations between the levels of return and risk. The analysis reported here demonstrates that the mean-variance approach to return and risk carries with it the consequence that statements about the relationship are inherently unverifiable in the context of the system being examined. This further implies that results obtained by using mean and variance of return are specific to the data and period examined and are not necessarily generalizable. Additionally, since mean and variance are arithmetically linked, augmenting the system with additional equations will not provide the information necessary to establish the validity or generalizability of statements involving the mean-variance relation. The analytic proofs are supplemented by examples drawn from an empirical study of the U.S. airline industry.
Characteristics of Risk Taking Executives
Authors: MacCrimmon Kenneth R. , Wehrung Donald A.
Published: November 2008

More than 500 top-level business executives were studied to ascertain the validity of common stereotypes of who takes risks and who avoids risks. We began with 13 risk measures based on theoretical grounds, naturally occurring situations, and attitudes. These measures were formed into seven consolidated measures using factor analysis. Data were gathered on numerous socio-economic variables including ones relating to personal, financial, and professional characteristics. When these characteristics were subjected to factor analysis, four main factors emerged. Linear discriminant analysis was used to address the question of whether risk takers can be differentiated from risk averters. The results were surprisingly clearcut. The most successful executives were the biggest risk takers; the most mature executives were the most risk averse.
A Modeling Language for Mathematical Programming
Authors: Fourer Robert , Gay David M. , Kernighan Brian W.
Published: November 2008

Practical large-scale mathematical programming involves more than just the application of an algorithm to minimize or maximize an objective function. Before any optimizing routine can be invoked, considerable effort must be expended to formulate the underlying model and to generate the requisite computational data structures. AMPL is a new language designed to make these steps easier and less error-prone. AMPL closely resembles the symbolic algebraic notation that many modelers use to describe mathematical programs, yet it is regular and formal enough to be processed by a computer system; it is particularly notable for the generality of its syntax and for the variety of its indexing operations. We have implemented an efficient translator that takes as input a linear AMPL model and associated data, and produces output suitable for standard linear programming optimizers. Both the language and the translator admit straightforward extensions to more general mathematical programs that incorporate nonlinear expressions or discrete variables.
The Timing of Competitive Market Entry: An Exploratory Study of New Industrial Products
Authors: Lilien Gary L. , Yoon Eunsang
Published: November 2008

In a dynamic, competitive environment, the decision to enter the market should be timed to balance the risks of premature entry against the missed opportunity of late entry. Previous research has mainly focused on the strategic aspects of the entry-time decision. In this paper we review the literature and develop a set of propositions about the timing of new product entry. Then we empirically test the relationship between the market-entry time and the likelihood of success for new industrial products.
The Queue Inference Engine: Deducing Queue Statistics from Transactional Data
Authors: Larson Richard C.
Published: November 2008

The transactional data of a queueing system are the recorded times of service commencement and service completion for each customer served. With increasing use of computers to aid or even perform service one often has machine readable transactional data, but virtually no information about the queue itself. In this paper we propose a way to deduce the queueing behavior of Poisson arrival queueing systems from only the transactional data and the Poisson assumption. For each congestion period in which queues may form (in front of a single or multiple servers), the key quantities obtained are mean wait in queue, time-dependent mean number in queue, and probability distribution of the number in queue observed by a randomly arriving customer. The methodology builds on arguments of order statistics and usually requires a computer to evaluate a recursive function. The results are exact for a homogeneous Poisson arrival process (with unknown parameter) and approximately correct for a slowly time varying Poisson process.
(m,T) Group Maintenance Policies
Authors: Ritchken Peter , Wilson John G.
Published: November 2008

A model that recognizes the advantages of coordinated group maintenance planning is established. The maintenance policy that is investigated calls for group maintenance to be conducted at time T or upon m failures, whichever comes first. This policy combines the best features of the well-known T-age and m-failure replacement policies. Using a renewal approach the economic objective is to minimize the long-run (expected) average cost per unit time. General cost structures and failure time distributions are allowed. An algorithm that does not require unimodality properties is provided for computing optimal policies for general failure time distribution and cost structures.
Myopic Policies for Some Inventory Models with Uncertain Demand Distributions
Authors: Lovejoy William S.
Published: November 2008

The majority of papers on stochastic inventory theory make the assumption that the distribution of consumer demand in each time period is known with certainty. While this assumption is unsupported in many applied contexts, it is conventionally held that more realistic models are more difficult to solve and will not yield simple operational policies. This paper shows that a simple inventory policy based upon a critical fractile can be optimal or near-optimal in some inventory models with parameter adaptive demand processes. In these, some parameter of the demand distribution is not known with certainty, and estimates of the parameter are updated in a statistical fashion as demand is observed through time. Examples include exponentially smoothed forecasts and Bayesian updating of parameter estimates. Bounds on the value loss relative to optimal cost, when using the critical fractile policy, can be calculated directly from the problem data. Some numerical examples illustrate the technique.
Unanimity and Compromise Among Probability Forecasters
Authors: Clemen Robert T. , Winkler Robert L.
Published: November 2008

When two forecasters agree regarding the probability of an uncertain event, should a decision maker adopt that probability as his or her own? A decision maker who does so is said to act in accord with the unanimity principle. We examine a variety of Bayesian consensus models with respect to their conformance (or lack thereof) to the unanimity principle and a more general compromise principle. In an analysis of a large set of probability forecast data from meteorology, we show how well the various models, when fit to the data, reflect the empirical pattern of conformance to these principles.
A New Look at the Returns and Risks to Pharmaceutical R&D
Authors: Grabowski Henry , Vernon John
Published: November 2008

This study investigates the returns to R&D for 100 new drugs introduced into the United States during the decade of the 1970s. In contrast to prior studies, it incorporates several significant structural changes that have occurred in the pharmaceutical industry during the 1980s. These include higher real drug prices and a greater degree of generic competition. A major finding is that the return on R&D for the average new drug is approximately equal to the 9 percent industry cost of capital. However, the performance of new drugs introduced during the latter half of the 1970s was markedly better than that of early 1970s introductions. This latter finding is consistent with the more rapid rate of industry growth in real R&D expenditures. The study also finds that the variation in returns is highly skewed, with only the top 30 drugs covering mean R&D costs on a fully allocated basis. Finally, it is shown that real drug price increases in the 1980s were necessary for the average new drug introduction to recover its R&D costs.
Power Approximation for Computing (s, S) Policies Using Service Level
Authors: Schneider Helmut , Ringuest Jeffrey L.
Published: November 2008

The paper presents an analytic approximation for computing (s, S) policies for single items under periodic review with fixed ordering costs, linear holding costs and a service level requirement. The replenishment lead time is fixed and unfilled demand is backlogged. The approximation is similar to Ehrhardt's “Power Approximation.” However, we do not assume the knowledge of shortage costs, which are difficult to estimate in practice. We define a γ-service level which measures the average backlog relative to the average demand. This quantity is easy to understand and frequently used in practice. The resulting power approximation policies are easy to compute and require only knowledge of the mean and variance of demand. Computational results show that the approximation gives a γ-service level which is within one percentage point of the required service level in most cases. Furthermore, the expected total costs of the approximation, taking into consideration a penalty cost for stockouts, are well within one percent of optimal.
Control Variates for Quantile Estimation
Authors: Hsu Jason C. , Nelson Barry L.
Published: November 2008

New point and interval estimators for quantiles that employ a control variate are introduced. The properties of these estimators do not depend on the usual assumption of joint normality between the random variable of interest and the control. Illustrative examples for queueing and stochastic activity network models are given. In those examples, the new estimators are superior to the standard estimator in terms of the mean squared error of the point estimator and the length of the confidence interval.
Design and Performance Models for End-of-Aisle Order Picking Systems
Authors: Bozer Yavuz A. , White John A.
Published: November 2008

The design of end-of-aisle order picking systems is addressed by focusing on a miniload automated storage/retrieval system. Performance models are developed for the miniload and a design algorithm is presented. The design algorithm has as its objective the minimization of the number of storage aisles subject to two types of capacity constraints: throughput and storage space. Although the system with two pick positions can be modeled directly as a closed queueing network with two servers and two customers, its special structure led to an alternative approach in developing the performance model. For two and more pick positions, the results obtained are compared with those obtainable using simulation and a diffusion approximation.
Queues with Slowly Varying Arrival and Service Processes
Authors: Gelenbe Erol , Rosenberg Catherine
Published: November 2008

We examine a generalisation of the M/G/1 queue. The arrival and service processes are governed by a Markov chain which determines the rate of arrival and the service time distribution from a finite set. This Markov chain is assumed to vary “slowly”, so that we are able to derive analytical results for the stationary distribution of the queue length using an approach based on decomposability. The practical interest of this model stems from the numerous applications where the parameters of queueing systems are time varying, such as inventory models, telephone systems, time-sharing systems, computer networks with bursty traffic, etc. We also show how this approach can be extended to arbitrary networks of queues and in particular to those with product form solution.
Scheduling Economic Lot Size Production Runs
Authors: Davis Samuel G.
Published: November 2008

Single capacitated production facilities where multiple products are produced pose particularly challenging scheduling problems. The traditional economic lot size calculation reflects the optimum production batch size in the light of the tradeoff between inventory carrying costs and order preparation/setup costs. However, these calculations are straightforward only when applied to a single product. When multiple products are produced on the same facility, the production quantities must be translated into a schedule which is within the capacity of the facility and results in the timely satisfaction of demand for each product.

Previously published solution procedures directly address the capacity issue. A far less tractable issue is the stockout concern. This issue has previously been addressed by either (1) imposing (often overly restrictive) constraints a priori to guarantee feasibility from the outset possibly eliminating more economic schedule alternatives from consideration or (2) heuristic enumeration procedures where trial solutions are evaluated for feasibility a posteriori but the escape from infeasibility often poses algorithmic difficulties.

In this paper, the focus is on providing a workable production sequence through a posteriori tests. Mathematical programming approaches are defined which include alternative formulations to better address the stockout concern. Goal programming procedures are proposed which provide a mechanism to directly examine the tradeoffs between scheduling efficiency and delivery performance.
Weekly Patterns in Japanese Stock Returns
Authors: Kato Kiyoshi
Published: November 2008

This study investigates the day of the week effect in the Japanese stock returns. Low Tuesday and high Wednesday returns are observed. Most of the positive returns arise during the nontrading period. The Monday effect is also observed in the week whose previous week is closed by Friday trading. Low Tuesday returns appear to be related to low Monday returns in the U.S. The weekly pattern is more pronounced for the returns of smaller firms. A reverse size effect is observed during the trading period.
The Innovation Diffusion Process in a Heterogeneous Population: A Micromodeling Approach
Authors: Chatterjee Rabik Ar , Eliashberg Jehoshua
Published: November 2008

A model of the innovation diffusion process is developed using a micromodeling approach that explicitly considers the determinants of adoption at the individual level in a decision analytic framework, and incorporates heterogeneity in the population with respect to initial perceptions, preference characteristics, and responsiveness to information. The micromodelling approach provides a behavioral basis for explaining adoption at the disaggregate level and the consequent pattern of diffusion at the aggregate level. The analytical implications of the model are compared and contrasted with the traditional, aggregate-level, diffusion models. An advantage of our approach is its micro-theory driven flexibility in accommodating various patterns of diffusion. Examples are provided of conditions under which the model yields diffusion patterns identical to those of some well-known aggregate models. A pilot study is reported, outlining procedures for data collection and estimation of the individual-level parameters, and providing a preliminary test of the predictive performance of the model. Measurement of the individual parameters prior to product launch enables potential applications of the model for segmentation of the target population in terms of their expected adoption times.
Arranging Queues in Series: A Simulation Experiment
Authors: Suresh S. , Whitt W.
Published: November 2008

For given external arrival process and given service-time distributions, the object is to determine the order of infinite-capacity single-server queues in series that minimizes the long-run average sojourn time per customer. We gain additional insight into this queueing design problem, and congestion in non-Markov open queueing networks more generally, by performing simulations for the case of two queues. For this design problem, we conclude that the key issue is variability: The order tends to matter more when the service-time distributions have significantly different variability, and less otherwise. Arranging the queues in order of increasing service-time variability, using the squared coefficient of variation as a partial characterization of variability, seems to be an effective simple design heuristic. Parametric-decomposition approximations seem to provide relatively good quantitative estimates of how much the order matters.
A Branch-and-Bound Method for the Fixed Charge Transportation Problem
Authors: Palekar Udatta S. , Karwan Mark H. , Zionts Stanley
Published: November 2008

In this paper we develop a new conditional penalty for the fixed charge transportation problem. This penalty is stronger than both the Driebeek penalties and the Lagrangean penalties of Cabot and Erenguc. Computational testing shows that the use of these penalties leads to significant reductions in enumeration and solution times for difficult problems in the size range tested. We also study the effect of problem parameters on the difficulty of the problem. The ratio of fixed charges to variable costs, the shape of the problem, arc density in the underlying network and fixed charge arc density are shown to have a significant effect on problem difficulty for problems involving up to 40 origins and 40 destinations.
Linear Optimal Designs and Optimal Contingency Plans
Authors: Lee Y. R. , Shi Y. , Yu P. L.
Published: November 2008

In optimal design problems we try to select a subset from the opportunity set for commitment for a period of time. As the external parameters can vary with time, optimal contingency plans must be constructed to cope with the external conditions. We describe the formulation and methods for locating potentially good designs and their corresponding optimal contingency plans using a multiple-criteria and multiple-constraint level (MC2) simplex method to solve the optimal design problems which have been shown to become amenable to the techniques of decision making under uncertainty.
A Model to Evaluate Variables Impacting the Productivity of Software Maintenance Projects
Authors: Banker Rajiv D. , Datar Srikant M. , Kemerer Chris F.
Published: November 2008

The cost of maintaining application software has been rapidly escalating, and is currently estimated to comprise from 50–80% of corporate information systems department budgets. In this research we develop an estimable production frontier model of software maintenance, using a new methodology that allows the simultaneous estimation of both the production frontier and the effects of several productivity factors. Our model allows deviations on both sides of the estimated frontier to reflect the impact of both production inefficiencies and random effects such as measurement errors.

The model is then estimated using an empirical dataset of 65 software maintenance projects from a large commercial bank. The insights obtained from the estimation results are found to be quite consistent for reasonable variations in the specification of the model. Estimates of the marginal impacts of all of the included productivity factors are obtained to aid managers in improving productivity in software maintenance.
Stale in the Saddle: CEO Tenure and the Match Between Organization and Environment
Authors: Miller Danny
Published: November 2008

It has often been argued that an organization's strategy and structure must be tailored or matched to the challenges posed by its environment. Our research shows that this match is less likely to be achieved by long-tenured CEO's than by their counterparts with less tenure. It also suggests that the failure to match strategy and environment hurts financial performance. More specifically, CEO tenure related inversely to the prescribed match between organization and environment, especially in uncertain settings and where ownership was concentrated. The match between environment and strategy was in turn positively related to financial performance.