In the literature on quality target selection, the management objective is to maximize expected profit. Instead, we build a model in which managers seek to maximize the expected utility generated by profit. We show that this is a generalization of the traditional model. We show that the target which maximizes expected profit coincides with the one chosen by manageres who are neutral toward risk. We show that a risk averse manager would set a target which differs from the one to maximize expected profit.
Numerical examples show that the difference can be considerable.
We present a matrix-geometric model for the analysis of two tandem queues, each with two priority classes. The state space keeps track of the queue lengths, the priority types, and the phase of service at each node. We develop an algorithm to compute the state probabilities, and the average flow times for each priority class. We create a geometric interpretation for 2x2 Markov transition matrices. Geometrically we illustrate the complete collection of transition matrices with a given limiting vector.