bluuebunny/crossref_metadata_2025 huggingface dataset:
Estimation Risk in Portfolio Selection: The Mean Variance Model Versus the Mean Absolute Deviation Model
Authors: Simaan Yusif
Published: November 2008

Konno and Yamazaki (Konno, H., K. Yamazaki. 1992. Mean-absolute deviation portfolio optimization model and its applications to Tokyo stock market. Management Sci. 39 519–531.) propose the mean absolute deviation (MAD) model as an alternative to the mean variance (MV) model. They claim it retains all the positive features of the MV model, saves the investor computing time, and does not require the covariance matrix. This paper shows that ignoring the covariance matrix results in greater estimation risk that outweighs the benefits. In both models, estimation error is more severe in small samples (small observations relative to the number of assets) and for investors with high risk tolerance. The MV model's lower estimation risk is most striking in small samples and for investors with a low risk tolerance.
Intraday Volatility in International Stock Index Futures Markets: Meteor Showers or Heat Waves?
Authors: Booth G. Geoffrey , Chowdhury Mustafa , Martikainen Teppo , Tse Yiuman
Published: November 2008

The international transmission of intraday price volatility among the United States, United Kingdom, and Japanese stock index futures markets in the period 1988–1994 is investigated in this paper. The empirical results based on extreme-value estimators and vector autoregression indicate the rapid transmission of information between markets. The volatilities of the U.S. and U.K. futures markets appear to follow a meteor shower rather than a heat wave type of process. This means that these volatilities react to shocks from other markets, i.e., they cannot be described only by their past values. However, the heat wave hypothesis is not rejected for the Japanese market, meaning that the shocks to Japanese volatility are mostly country-specific. A multivariate GARCH model supports the U.K. and Japanese but not the U.S. results.
Note: An Economic Analysis of IS Budgets
Authors: Gurbaxani Vijay , Kraemer Kenneth , Vitalari Nicholas
Published: November 2008

This paper conducts an empirical analysis of information systems budget data focusing on the implications for the efficient production of information services. We use a model of the production of information services based on the economic theory of production to develop testable hypotheses for budget behavior. In particular, we focus on two important issues: (1) the allocation of the information systems budget to its two largest components—personnel and hardware, and (2) the existence of scale economies in the provision of information services. These issues are examined using budget data collected through a survey of information systems managers in Fortune 500 corporations. We find that the optimal ratio of personnel to hardware expenditures is independent of the scale of the information systems organization for a given set of prices, and that there are no measurable economies of scale in the provision of information services. The implications of the analysis for the management of information services are discussed.
Optimizing an International Network of Partially Owned Plants Under Conditions of Trade Liberalization
Authors: Dasu Sriram , de la Torre José
Published: November 2008

For the last four decades the preferred economic philosophy in much of Latin America was that of import-substituting industrialization. As a result multinational corporations (MNCs) approached different countries with the expectation that each plant would primarily serve its domestic market. Each of these plants was partially owned by the MNC. Beginning in the late 1980s, Latin America countries began decreasing barriers to cross-border trade. This made competition between the units belonging to a common network possible for the first time. Operations which had subsisted side by side in spite of differences in costs and quality of output, and which were under the control of different owners now found themselves in competition with one another and having to rationalize their efforts. In this paper we analyze the problem of operating a network of plants under conditions of free trade and exchange rate fluctuations, when the firms that compose it are partially-owned subsidiaries of an MNC. A model of three subsidiaries and four countries is developed for one industry, based on actual corporate and economic data. We study the problem of coordinating the activities of the subsidiaries and allocating the gains arising from coordination.
Delays in New Product Introductions and the Market Value of the Firm: The Consequences of Being Late to the Market
Authors: Hendricks Kevin B. , Singhal Vinod R.
Published: November 2008

This paper empirically estimates the impact of not meeting promised new product introduction dates on the market value of the firm. We estimate the average “abnormal” change in the market value for a sample of 101 firms around the date when information about delaying the introduction of new products is publicly announced. On average, delay announcements decrease the market value of the firm by 5.25%. The average dollar change in the market value in 1991 dollars is $−119.3 million. The evidence suggests that there are significant penalties for not introducing new products on time.

To provide further insight, regression analyses are used to identify factors that influence the direction and magnitude of the change in market value. We find that the competitiveness of the industry in which the firm operates, the size of the firm, and the firm's degree of diversification are statistically significant predictors for the change in the market value of firms that announce delays in the introduction of new products.
Generalising Interest Rate Duration with Directional Derivatives: Direction X and Applications
Authors: Bowden Roger J.
Published: November 2008

Conventional (or Fisher-Weil) duration is an ordinary derivative that measures the response of portfolio value to marginal parallel shifts in the term structure, while other proposed measures are generally specific to particular interest rate processes. In this paper, we show that portfolio responses to arbitrary shifts in the term structure may be handled by the use of Frèchet or directional derivatives, presenting a simple algorithm for the directional derivative of a fixed interest portfolio, viewed as a set of cash flows. For a given portfolio, one can locate the most sensitive areas along the term structure by computing a function or profile (“Direction X”) that gives the term structure movement to which the portfolio is most exposed. Immunisation techniques can be based on choosing ancillary assets that ensure that the portfolio directional derivative is zero, or as close to zero as possible; this generalises approaches based on factor models of the term structure. The analysis is applied to both continuous and discrete time.
Optimal Operating Policies in the Presence of Exchange Rate Variability
Authors: Dasu Sriram , Li Lode
Published: November 2008

We study the structure of the optimal policies for a firm operating plants in different countries. The relative costs of production between the plants are assumed to vary over time due to economic and political factors such as exchange rates, inflation, taxes, and tariffs. Based on the costs, the firm can alter the quantity produced in each plant. We determine the structure of the optimal policies for deciding when and by how much to alter the production quantities. When the switch-over costs are linear or step functions, regardless of whether the variable production costs are concave or piece-wise linear convex, and regardless of whether the firm is supplying one or more markets, the optimal policy is always a barrier policy. The optimal barriers can be determined by using linear programming techniques, and the optimal costs can be computed by solving a system of linear equations. When the number of optimal barriers is two, the optimal expected costs and the condition that determines the optimal barriers are explicitly derived.
A Theoretical Study of Organizational Performance Under Information Distortion
Authors: Carley Kathleen M. , Lin Zhiang
Published: November 2008

How should organizations of intelligent agents be designed so that they exhibit high performance despite information distortion? We present a formal information-based network model of organizational performance given a distributed decision making environment in which agents encounter a radar detection task. Using this model, we examine the performance of organizations with various designs in different task environments subject to various types of information distortion. We distinguish five sources of information distortion—missing information, incorrect information, agent unavailability, communication channel breakdowns, and agent turnover. This formal analysis suggests that: (1) regardless of information distortion, performance is enhanced if there is a match between the complexity of organizational design and task environment; (2) task environment characteristics have more effect on performance than information distortion and the organizational design; (3) the effects of information distortion can be combated by training, but only to a limited extent; and (4) technology based information distortion typically is more debilitating than personnel induced information distortion.
The Impact of Just-in-Time Manufacturing and Its Infrastructure on Manufacturing Performance
Authors: Sakakibara Sadao , Flynn Barbara B. , Schroeder Roger G. , Morris William T.
Published: November 2008

We consider Just-in-Time (JIT) to be an overall organizational phenomenon. Accordingly, we developed and tested a model that includes both JIT practices and the infrastructure practices hypothesized to provide an environment in which JIT practices perform more effectively. Canonical correlation analysis was used to test five hypotheses. The results indicated that: (1) there was not a significant relationship between the use of JIT practices, alone, and manufacturing performance, (2) there was a very strong relationship between JIT practices and infrastructure practices; (3) the combination of JIT management and infrastructure practice was related to manufacturing performance; (4) infrastructure, by itself, is sufficient to explain manufacturing performance; and (5) manufacturing performance was related to competitive advantage. These findings provide support for the notion that JIT is an overall organizational phenomenon, rather than limited to strictly shop floor practices, and that at least part of its effect on manufacturing performance may be through providing a set of improvement targets and discipline for the entire organization. In addition, the analysis highlights the areas of infrastructure practice most relevant for future research.
Information Technology and Organization Design: Locating Decisions and Information
Authors: Nault Barrie R.
Published: November 2008

We study the impact of information technology (IT) on the profitability of individual organization designs and on the relative profitability of different organization designs. We develop models where organization design is defined by the location of investment decision authority. We consider global and local investment when there is an information asymmetry between a central authority and decentralized nodes—decentralized nodes make better local investment decisions because of their local knowledge. We define three separate organization designs: a hierarchy where all investments are made by a central authority, a market where all investments are made by the decentralized nodes, and a mixed mode where global investments are made by a central authority and local investments are made by decentralized nodes. Because of complementarities between global and local investment, we show that there is under investment relative to first-best in all three organization designs. We also find that IT can be used to mitigate that underinvestment, either by bringing information to the decision maker or by redesigning the monitoring and incentive structure. We demonstrate that IT does not necessarily favor decentralized organization designs, and we show how the costs of coordination may result in the mixed mode being dominated by one or both of the alternative organization designs. Thus, collocation of investment decision rights and information that results in decisions that require coordination might not be optimal when the costs of not synchronizing global and local investment are high.
Likelihood Ratio Derivative Estimation for Finite-Time Performance Measures in Generalized Semi-Markov Processes
Authors: Nakayama Marvin K. , Shahabuddin Perwez
Published: November 2008

This paper investigates the likelihood ratio method for estimating derivatives of finite-time performance measures in generalized semi-Markov processes (GSMPs). We develop readily verifiable conditions for the applicability of this method. Our conditions mainly place restrictions on the basic building blocks (i.e., the transition probabilities, the distribution and density functions of the event lifetimes, and the initial distribution) of the GSMP, which is in contrast to the structural conditions needed for infinitesimal perturbation analysis. We explicitly show that our conditions hold in many practical settings, and in particular, for large classes of queueing and reliability models. One intermediate result we obtain in this study, which is of independent value, is to formally show that the random variable representing the number of occurring events in a GSMP in a finite time horizon, has finite exponential moments in a neighborhood of zero.
The Effects of Cross-Ruff Coupons on Sales and Profits
Authors: Dhar Sanjay K. , Raju Jagmohan S.
Published: November 2008

Cross-ruff coupons are obtained at the time of purchase of a carrier brand and may be redeemed at a later date on a target brand. These coupons therefore have the ability to link consumer purchases across different brands as well as shopping trips. We model the effects of cross-ruff coupons on consumer choice behavior and derive the conditions under which cross-ruff coupons can lead to higher sales and profits than other types of package coupons. The model also provides insights into the selection of appropriate carrier and target brands, and on how the choice of an appropriate carrier or a target brand is affected when the categories that these brands belong to are demand complements or substitutes. We conduct an empirical analysis using data from 195 different cross-ruff coupon campaigns observed in grocery stores in a major U.S. city over a three-month period. The data are consistent with the key insights provided by the model.
An Efficient Procedure for Designing Single Allocation Hub and Spoke Systems
Authors: Pirkul Hasan , Schilling David A.
Published: November 2008

Given the widespread use of the hub and spoke network architecture and its growing importance to competitiveness in logistics, communication, and mass transportation, there has been considerable interest by practitioners and researchers alike in finding efficient methods for designing such networks. This paper provides a method that delivers both high quality solutions and firm measures of that quality, and allows problems to be solved in reasonable time on a desktop computer. The approach begins with a previously proposed tight linear programming formulation and uses subgradient optimization on a lagrangian relaxation of the model. However, to dramatically improve the performance of this approach, we augment a subproblem of the lagrangian relaxation model with a cut constraint. In computational experiments on eighty-four standard test problems, average gaps are 0.048%. Maximum gaps are under 1% while average solution times on a Pentium-166 are under five minutes.
Standardized Time Series Lp-Norm Variance Estimators for Simulations
Authors: Tokol Gamze , Goldsman David , Ockerman Daniel H. , Swain James J.
Published: November 2008

This paper studies a class of estimators for the variance parameter of a stationary stochastic process. The estimators are based on Lp norms of standardized time series, and they generalize previously studied estimators due to Schruben. We show that the new estimators have some desirable properties: they are asymptotically unbiased and have low asymptotic variance. We also illustrate empirically the performance of the Lp-norm estimators on various stochastic processes.
Assessing the Importance of Design Through Product Archaeology
Authors: Ulrich Karl T. , Pearson Scott
Published: November 2008

This paper assesses the importance of design in determining product costs by measuring the variation in design performance among a set of competing design efforts. This assessment is completed for a set of functionally similar products in a single product category: automatic drip coffee makers. The approach of this study is to measure the manufacturing content—the attributes of the design that drive cost—through analysis of the physical products themselves, and to estimate how variation in manufacturing content relates to variation in cost in a hypothetical manufacturing setting. We call this approach product archaeology. For the domain of coffee makers, we find significant variation in manufacturing content. This variation in manufacturing content corresponds to a range of estimated manufacturing costs, for a hypothetical manufacturing system, of approximately 50 percent of the average manufacturing cost of the products. We also find that differences in capabilities among product development efforts are the most plausible explanation for the differences in manufacturing content.
The Impact of Discharge Decisions on Health Care Quality
Authors: Berk Emre , Moinzadeh Kamran
Published: November 2008

In this paper, we present a normative study that describes the impact of discharging decisions in the face of resource shortages. We develop a model that represents the dynamics of a health care unit. Then, to capture the essence of discharge decisions, we consider discharge policies that incorporate both the occupancy level of the unit and the status of patients measured by their stage of recovery and the time they have spent in that stage. We believe that our model can be used as an aid to physicians and administrators to better assess discharge and/or capacity decisions. In addition, we investigate the impact of discharge decisions on the measures that represent the quality of care at a facility such as average hospital stays, system accessibility, and average complication risk of discharged patients. Our findings illustrate that inclusion of early discharge option improves system accessibility significantly and does not jeopardize care equity among patients. Furthermore, introduction of early discharge option has more pronounced effects on increasing care unit capacity than addition of open beds with no early discharges.
Improving Decision Making by Means of a Marketing Decision Support System
Authors: van Bruggen Gerrit H. , Smidts Ale , Wierenga Berend
Published: November 2008

Marketing decision makers are confronted with an increasing amount of information. This leads to a complex decision environment that may cause decision makers to lapse into using mental-effort-reducing heuristics such as anchoring and adjustment. In an experimental study, we find that the use of a marketing decision support system (MDSS) increases the effectiveness of marketing decision makers. An MDSS is effective because it assists its users in identifying the important decision variables and, subsequently, making better decisions based on those variables. Decision makers using an MDSS are also less susceptible to applying the anchoring and adjustment heuristic and, therefore, show more variation in their decisions in a dynamic environment. Low-analytical decision makers and decision makers operating under low time pressure especially benefit from using an MDSS.
Validation of Trace-Driven Simulation Models: A Novel Regression Test
Authors: Kleijnen Jack P. C. , Bettonvil Bert , Van Groenendaal Willem
Published: November 2008

This paper argues that it is wrong to require that regressing the outputs of a trace-driven simulation on the observed real outcomes should give a 45° (unit slope) line through the origin (zero intercept). This note proposes instead an alternative requirement: the responses of the simulated and the real systems should have the same means and the same variances. To test statistically whether this requirement is satisfied, a novel procedure is derived: regress the differences between simulated and real responses on their associated sums, and test whether the resulting intercept and slope are both zero. This novel but simple test assumes identically, independently, and normally distributed outputs of the real system and the simulated system. The old and the new procedures are investigated in extensive Monte Carlo experiments that simulate M/M/1 queueing systems. The conclusions are: (i) the naive intuitive test rejects a valid simulation model substantially more often than the novel test does; (ii) the naive test shows “perverse” behavior within a certain domain: the worse the simulation model, the higher its estimated probability of acceptance; and (iii) the novel test does not reject a valid simulation model too often (its type I error probability is correct), provided the queueing response is transformed appropriately to obtain (nearly) normally distributed responses.
Structural Comparison of Data Envelopment Analysis and Multiple Objective Linear Programming
Authors: Joro Tarja , Korhonen Pekka , Wallenius Jyrki
Published: November 2008

The concept of efficiency as it applies to Decision Making Units (DMUs), solutions, alternatives plays an important role both in Data Envelopment Analysis (DEA) and Multiple Objective Linear Programming (MOLP). Despite this and other apparent similarities, DEA and MOLP research has developed separately. We show that structurally the DEA formulation to identify efficient units is quite similar to the MOLP model based on the reference point or the reference direction approach to generate efficient solutions. DEA and MOLP should not be seen as substitutes, but rather as complements. We show that they cross-fertilize each other. MOLP provides interesting extensions to DEA and DEA provides new areas of application to MOLP.
Survival-Enhancing Learning in the Manhattan Hotel Industry, 1898–1980
Authors: Baum Joel A. C. , Ingram Paul
Published: November 2008

In this study, we examine how experience at the level of the organization, the population, and the related group affects the failure of Manhattan hotels. We find organizational experience has a U-shaped effect on failure; that organizations enjoy reduced failure as a function of population experience before their founding, but not after; and that related organizations provide experience that lowers failure, but it matters whether their experience is local or non-local, and if it was acquired before or after the relationship was established. These results indicate both the difficulty of applying different types of experience to reduce the risk of organizational failure, and the relevance of experience for the evolution of organizational populations.
Technological Forecasting—Model Selection, Model Stability, and Combining Models
Authors: Meade Nigel , Islam Towhidul
Published: November 2008

The paper identifies 29 models that the literature suggests are appropriate for technological forecasting. These models are divided into three classes according to the timing of the point of inflexion in the innovation or substitution process. Faced with a given data set and such a choice, the issue of model selection needs to be addressed. Evidence used to aid model selection is drawn from measures of model fit and model stability. An analysis of the forecasting performance of these models using simulated data sets shows that it is easier to identify a class of possible models rather than the ‘best’ model. This leads to the combining of model forecasts. The performance of the combined forecasts appears promising with a tendency to outperform the individual component models.
Computer-Mediated Communication and Majority Influence: Assessing the Impact in an Individualistic and a Collectivistic Culture
Authors: Tan Bernard C. Y. , Wei Kwok-Kee , Watson Richard T. , Clapper Danial L. , McLean Ephraim R.
Published: November 2008

Strong majority influence can potentially harm organizational decisions by causing decision makers to engage in groupthink. This study examines whether and how computer-mediated communication (CMC) can reduce majority influence and thereby enhance the quality of decisions in some situations. To measure the impact of CMC on majority influence, three settings (unsupported, face-to-face CMC, and dispersed CMC) were compared. Matching laboratory experiments were carried out in an individualistic (the US) and a collectivistic culture (Singapore) to determine how the impact of CMC might be moderated by national culture. An intellective and a preference task were used to see whether the impact of CMC might be moderated by task type. The results showed that the impact of CMC on majority influence was contingent upon national culture. In the individualistic culture, majority influence was stronger in the unsupported setting than the face-to-face CMC and dispersed CMC settings. In the collectivistic culture, there were no corresponding differences. The results also revealed that the impact of CMC on majority influence was not moderated by task type. Instead, task type had a direct impact on majority influence. Regardless of the setting involved, majority influence was stronger with the preference than the intellective task. Besides demonstrating how cultural factors may moderate the impact of CMC, this study raises the broader issue of cultural relativism in current knowledge on CMC.
Infinite Horizon Production Planning in Time-Varying Systems with Convex Production and Inventory Costs
Authors: Smith Robert L. , Zhang Rachel Q.
Published: November 2008

We consider the planning of production over the infinite horizon in a system with time-varying convex production and inventory holding costs. This production lot size problem is frequently faced in industry where a forecast of future demand must be made and production is to be scheduled based on the forecast. Because forecasts of the future are costly and difficult to validate, a firm would like to minimize the number of periods into the future it needs to forecast in order to make an optimal production decision today. In this paper, we first prove that under very general conditions finite horizon versions of the problem exist that lead to an optimal production level at any decision epoch. In particular, we show it suffices for the first period infinite horizon production decision to solve for a horizon that exceeds the longest time interval over which it can prove profitable to carry inventory. We then develop a closed-form expression for computing such a horizon and provide a simple finite algorithm to recursively compute an infinite horizon optimal production schedule.
A Value Efficiency Approach to Incorporating Preference Information in Data Envelopment Analysis
Authors: Halme Merja , Joro Tarja , Korhonen Pekka , Salo Seppo , Wallenius Jyrki
Published: November 2008

We develop a procedure and the requisite theory for incorporating preference information in a novel way in the efficiency analysis of Decision Making Units. The efficiency of Decision Making Units is defined in the spirit of Data Envelopment Analysis (DEA), complemented with Decision Maker’s preference information concerning the desirable structure of inputs and outputs. Our procedure begins by aiding the Decision Maker in searching for the most preferred combination of inputs and outputs of Decision Making Units (for short, Most Preferred Solution) which are efficient in DEA. Then, assuming that the Decision Maker’s Most Preferred Solution maximizes his/her underlying (unknown) value function, we approximate the indifference contour of the value function at this point with its possible tangent hyperplanes. Value Efficiency scores are then calculated for each Decision Making Unit comparing the inefficient units to units having the same value as the Most Preferred Solution. The resulting Value Efficiency scores are optimistic approximations of the true scores. The procedure and the resulting efficiency scores are immediately applicable to solving practical problems.
Simulating Project Work Processes and Organizations: Toward a Micro-Contingency Theory of Organizational Design
Authors: Levitt Raymond E. , Thomsen Jan , Christiansen Tore R. , Kunz John C. , Jin Yan , Nass Clifford
Published: November 2008

The Virtual Design Team (VDT) extends and operationalizes Galbraith's (1973) information-processing view of organizations. VDT simulates the micro-level information processing, communication, and coordination behavior of participants in a project organization and predicts several measures of participant and project-level performance. VDT-1 (Cohen 1991) and VDT-2 (Christiansen 1993) modeled project organizations containing actors with perfectly congruent goals engaged in complex but routine engineering design work within static organization structures. VDT-3 extends the VDT-2 work process representation to include measures of activity flexibility, complexity, uncertainty, and interdependence strength. It explicitly models the effects of goal incongruency between agents on their information processing and communication behavior while executing more flexible tasks. These extensions allow VDT to model more flexible organizations executing less routine work processes. VDT thus bridges rigorously between cognitive and social psychological micro-organization theory and sociological and economic macro-organization theory for project teams. VDT-3 has been used to model and simulate the design of two major subsystems of a complex satellite launch vehicle. This case study provides initial evidence that the micro-contingency theory embodied in VDT-3 can be used to predict organizational breakdowns, and to evaluate alternative organizational changes to mitigate identified risks. VDT thus supports true “organizational engineering” for project teams.
A Comparison of Graphical Techniques for Asymmetric Decision Problems
Authors: Bielza Concha , Shenoy Prakash P.
Published: November 2008

We compare four graphical techniques for representation and solution of asymmetric decision problems—decision trees, influence diagrams, valuation networks, and sequential decision diagrams. We solve a modified version of Covaliu and Oliver's Reactor problem using each of the four techniques. For each technique, we highlight the strengths, weaknesses, and some open issues that perhaps can be resolved with further research.
Pricing Patterns of Cellular Phones and Phonecalls: A Segment-Level Analysis
Authors: Jain Dipak C. , Muller Eitan , Vilcassim Naufel J.
Published: November 2008

One expectation of the U.S. Federal Communications Commission (FCC) in the early stages of the cellular communications industry was that the presence of two licensees in each market would ensure competition, and thereby result in declining prices over time for both cellular phones (handsets) and phonecalls. However, industry observers have noted recently that although the price of handsets has declined over time, the price of the phonecalls has not. We investigate this interesting pricing issue by modeling the market interaction between the providers of cellular services and also their interaction with customers using a game theoretic framework.

A critical assumption in the development of our model is that there exist segments of customers with different valuations, usage levels, and price sensitivities for cellular service. Empirically, we provide support for the existence of two customer segments (viz., Business/Professional and Personal) from both secondary data on industry usage and revenue, and primary data collected from a conjoint analysis study of cellular service customers. From the latter source, we also establish that the Business/Professional customers are more sensitive to prices of phonecalls than the Personal segment.

From our analytical model, we characterize the conditions under which penetration and skimming pricing strategies for the handsets are profit-maximizing from the sellers’ standpoint, and derive the corresponding price of phonecalls. One of our main analytical results is that a competitive structure can result in lower prices over time for the handset, but higher prices for the phonecalls, depending on production costs of the handset. We are thus able to provide a theoretical explanation for the observed price patterns for the handset and phonecalls.
Centralization of Stocks: Retailers vs. Manufacturer
Authors: Anupindi Ravi , Bassok Yehuda
Published: November 2008

A well-known result in inventory theory is that physical centralization of stocks in a system with multiple retailers decreases total costs and increases total profits for the retailers. However, does this centralization also benefit the manufacturer, whose goods the retailers stock, when customers unsatisfied at retailers due to stock-outs are considered lost sales? In this paper we consider a model with two retailers and one manufacturer. We then compare two systems: one in which the retailers hold stocks separately and the other in which they cooperate to centralize stocks at a single location. We show that whether or not centralization of stocks by retailers increases profits for the manufacturer depends on the level of “market search” in the supply chain. Market search is measured as the fraction of customers who, unsatisfied at their “local” retailer due to a stock-out, search for the good at the other retailer before leaving the system. Specifically, we show that there exists a threshold level for market search above which the manufacturer loses. Furthermore, for “very high” search levels, even the system profit (sum of manufacturer and retailer profits) may decrease upon centralization. We then compare the performance of the two systems under optimal pricing/subsidy mechanisms and show that often a manufacturer is better off in a decentralized system with high market search. We conclude with a discussion of the role of information systems in the decentralized systems.
Design of Communication Networks with Survivability Constraints
Authors: Myung Young-Soo , Kim Hyun-joon , Tcha Dong-wan
Published: November 2008

The rapid growth of telecommunication capacity, driven in part by the wide-ranging deployment of fiber-optic technology has led to increasing concern regarding the survivability of such networks. In communication networks, survivability is usually defined as the percentage of total traffic surviving some network failures in the worst case. Most of the survivable network design models proposed to date indirectly ensure network survivability by invoking a connectivity constraint, which calls for a prespecified number of paths between every distinct pair of nodes in the network. In this paper, we introduce a new network design model which directly addresses survivability in terms of a survivability constraint which specifies the allowable level of lost traffic during a network failure under prescribed conditions. The new model enables a network designer to consider a richer set of alternative network topologies than the existing connectivity models, and encompasses the connectivity models as special cases. The paper presents a procedure to compute link survivability, develops an integer programming formulation of the proposed survivability model, and discusses a special case of practical interest and its associated heuristic procedure. The proposed heuristic is tested on data from real-world problems as well as randomly generated problems.
Optimality of the Symmetric Workload Allocation in a Single-Server Flow Line System
Authors: Kim Hyoungtae , Park Sungsoo
Published: November 2008

This paper provides a proof of the symmetrical allocation property (SAP), conjectured in an earlier work on the workload allocation problem for a manufacturing flow line system. The system consists of N single-Erlang servers in series having a common interstation buffer capacity. SAP says a symmetric workload allocation exists among the optimal solutions. We first show the reciprocal of the throughput is increasing and jointly convex, not component-wisely, in workloads. Then we apply the line reversibility property to obtain an alternative optimal allocation symmetric for any optimal workload allocation that is asymmetric. A sufficient condition for SAP to hold is also given, which relaxes the hypothesizing assumptions on the service-time distribution and interstation buffer capacities.
Decentralized Multi-Echelon Supply Chains: Incentives and Information
Authors: Lee Hau , Whang Seungjin
Published: November 2008

Consider a supply chain in which a product must pass through multiple sites located in series before it is finally delivered to outside customers. Incentive problems may arise in this system when decisions are delegated to corresponding site managers, each maximizing his/her own performance metric. From the overall system's point of view, the decentralized supply chain may not be as efficient as the centralized one. In practice, alternative performance mechanisms are often used to align the incentives of the different managers in a supply chain. This paper discusses the cost conservation, incentive compatibility, and informational decentralizability properties of these mechanisms. In particular, for a special type of supply chain, we show that a performance measurement scheme involving transfer pricing, consignment, shortage reimbursement, and an additional backlog penalty at the last downstream site satisfies all these properties.
Evolutionary Patterns of Flexible Automation and Performance: A Longitudinal Study
Authors: Boyer Kenneth K.
Published: November 2008

This study presents a longitudinal analysis of patterns of investment in advanced manufacturing technologies (AMT) and financial performance. Investments in AMT from 112 manufacturing plants in the metal-working industries are examined. Data were collected via a mail survey administered to 202 plants in 1994, and readministered to 112 of the same plants in 1996. This study seeks to fill a void in the area of technology management, which is comprised primarily of cross-sectional studies that do not address the dynamic nature of investments in technology. Four major conclusions are drawn from the data. First, several individual technologies have higher investments in 1996 than in 1994. In particular, electronic mail has the largest increase in investment, a finding that suggests that manufacturing firms are finding ways to take advantage of the exploding potential of electronic communication. Our second conclusion is that plants invest in technology in an incremental fashion over time rather than using an all-or-nothing approach. Plants with low investments follow one of three technology strategies as their investments in AMTs evolve: (1) continued low investment, (2) investment primarily in design-based technologies, or (3) equalized investment in design, manufacturing, and administrative AMTs. Third, analysis of the degree of manufacturing involvement in developing business strategy indicates that plants that have a more proactive role for manufacturing invest greater resources in AMTs. Finally, while AMT investment was not positively associated with performance in a cross-sectional analysis, longitudinal analysis of data collected two years later does reveal a relationship. In short, the analysis supports the proposition that there is a lag between initial investment and resulting performance improvements.
Predicting Queueing Delays
Authors: Whitt Ward
Published: November 2008

This paper investigates the possibility of predicting each customer's waiting time in queue before starting service in a multiserver service system with the first-come first-served service discipline, such as a telephone call center. A predicted waiting-time distribution or an appropriate summary statistic such as the mean or the 90th percentile may be communicated to the customer upon arrival and possibly thereafter in order to improve customer satisfaction. The predicted waiting-time distribution may also be used by the service provider to better manage the service system, e.g., to help decide when to add additional service agents. The possibility of making reliable predictions is enhanced by exploiting information about system state, including the number of customers in the system ahead of the current customer. Additional information beyond the number of customers in the system may be obtained by classifying customers and the service agents to which they are assigned. For nonexponential service times, the elapsed service times of customers in service can often be used to advantage to compute conditional-remaining-service-time distributions. Approximations are proposed to convert the distributions of remaining service times into the distribution of the desired customer waiting time. The analysis reveals the advantage from exploiting additional information.
Single-Stage Resource Allocation and Economic Lot Scheduling on Multiple, Nonidentical Production Lines
Authors: Bollapragada Ramesh , Rao Uday
Published: November 2008

This paper focuses on simultaneous resource allocation, lot-sizing, and scheduling in a multimachine, deterministic ELSP environment. We consider the problem of apportioning item production to distinct manufacturing lines with different costs and capabilities (production rates). The objective is to minimize the long-run average production, setup, inventory, and shortage penalty costs (due to lost sales).

Restricting attention to rotation schedules, we develop a concave minimization model of the problem, generate heuristic solutions and a lower bound on the cost of any feasible solution. Computational experiments indicate that our heuristic solution is within a few percent of the lower bound. We also investigate sensitivity of costs to model parameters, and illustrate how our model may be used to determine target values for equipment utilization.
A Branch-First, Cut-Second Approach for Locomotive Assignment
Authors: Ziarati Koorush , Soumis François , Desrosiers Jacques , Solomon Marius M.
Published: November 2008

The problem of assigning locomotives to trains consists of selecting the types and number of engines that minimize the fixed and operational locomotive costs resulting from providing sufficient power to pull trains on fixed schedules. The force required to pull a train is often expressed in terms of horsepower and tonnage requirements rather than in terms of number of engines. This complicates the solution process of the integer programming formulation and usually creates a large integrality gap. Furthermore, the solution of the linearly relaxed problem is strongly fractional.

To obtain integer solutions, we propose a novel branch-and-cut approach. The core of the method consists of branching decisions that define on one branch the projection of the problem on a low-dimensional subspace. There, the facets of the polyhedron describing a restricted constraint set can be easily derived. We call this approach branch-first, cut-second. We first derive facets when at most two types of engines are used. We then extend the branching rule to cases involving additional locomotive types.

We have conducted computational experiments using actual data from the Canadian National railway company. Simulated test-problems involving two or more locomotive types were solved over 1-, 2-, and 3-day rolling horizons. The cuts were successful in reducing the average integrality gap by 52% for the two-type case and by 34% when more than 25 types were used. Furthermore, the branch-first, cut-second approach was instrumental in improving the best known solution for an almost 2,000-leg weekly problem involving 26 locomotive types. It reduced the number of locomotives by 11, or 1.1%, at an equivalent savings of $3,000,000 per unit. Additional tests on different weekly data produced almost identical results.
Planning Business Progress
Authors: Salveson Melvin E.
Published: November 2008

A study of the patterns underlying business profits and progress was touched off by loss of market position and profit. The problem was to discover patterns in our technologically advanced economy which would give top management a new basis for planning profit. Useful insights were gained, particularly on the acceleration in idea production and productivity and on the character of the innovation cycle and its relation to employment, investment, and profitability. A model is built which corrects certain errors in Parkinson's law and Keynes theory.
A Regional Production and Transportation Model
Authors: Berman Edward B.
Published: November 2008

A linear programming model is set forth for maximizing a vector of final demand deliveries under both regional production constraints and transportation network constraints. The model is essentially designed to study short-run effects, and hence no provision is made for the expansion of either industrial or transportation capacities. Within available capacities, however, the location of production is chosen so as to maximize final demand deliveries.

A rough dynamic version of the model is presented as well as an algorithm for reaching an approximation of the optimum solution.
A Note on the Multi-Commodity Warehouse Problem
Authors: Eastman Willard L.
Published: November 2008

The warehouse problem requires the determination of a sequence of buy and sell decisions at discrete points in time. By equating points in time and points in space, the warehouse problem can be identified with a special case of the shortest-route problem. In the present note a special matrix formulation is employed to yield simple solutions to both problems. An example is included to illustrate the method.
The Use of an Economic Lot Range in Scheduling Production
Authors: Solomon Morris J.
Published: November 2008

Conventional production scheduling makes use of a minimum cost production quantity. Since cost is relatively insensitive to the production quantity within some range of the minimum cost production quantity, substantial freedom of action can be given the production scheduler provided he stays within some defined range. This paper presents two approaches to defining such a range. One approach involves little computation but can be applied only to the simplest type of cost function. The other approach can be applied to any cost function, but is more difficult to compute. With either approach, precomputed tables can simplify the scheduling process on a near-optimum basis.
A Simple Allocation Problem
Authors: Derman Cyrus
Published: November 2008

The problem studied is that of how to allocate a fixed amount of some resource among various activities where, after a period of time, unused portions of the resource lose their value. Demand for the resource at each station is considered to be random. The problem is a special case of one usually referred to as the distribution of the effort. The question of determining the optimal amount of resource is also discussed.
On the Status of Multistage Linear Programming Problems
Authors: Dantzig George B.
Published: November 2008

In the first part special cases are presented. Typical of the multistage problems are those encountered in dynamic problems. If the time span is divided into periods, the initial inventory provides the input for activities that occur in the first period or first stage. The output from the first stage provides the inventory input for activities in the second period or stage, etc. [Dantzig, G. B. 1951. Programming of interdependent activities: Mathematical model, chapter II. T. C. Koopmans, ed. Activity Analysis of Production and Allocation. John Wiley and Sons, 19–33. Also Econometrica 17 (3–4) (1949).]. In the general case, the need to solve large scale systems is considered, followed by a discussion on solving general block triangular systems that cover a vast majority of practical problems.