Search

A simple linear model is constructed for production, use and recycling of various paper and related products. This model is used to estimate the maximum feasible recycling rate given the current state of pulp and paper technology. Parametric linear programming is used to investigate the effect of the efficiency of collecting, sorting and transporting waste paper on the fraction recycled. [ABSTRACT FROM AUTHOR]

The normative solution concepts of game theory try to provide a clear mathematical characterization of what it means to act rationally in a game where all players expect each other to act rationally. Kadane and Larkey reject the use of these normative solution concepts. Yet, this amounts to throwing away an important piece of information to the effect that the players are rational and expect each other to be rational. Even in situations where the players do not expect each other to act with complete rationality, normative game theory can help them heuristically to formulate reasonable expectations about the other players' behavior. [ABSTRACT FROM AUTHOR]

The article comments on the article "Determination Of Warranty Reserves: An Extension," by H. N. Amato and E. E. Anderson, which extends study on the author's original article "Determination Of Warranty Reserves," featured in the June 1969 issue. The author expresses pleasure in the extension of his work and agrees with Amato and Anderson's paper. However, he feels that some cautiousness must be taken by the potential user. Several cause and effect situations, with regard to the value of the variables in the equation, are examined to show how they might not lead to consistent or positive results.

The article presents comments on the management science paper "On Sequencing n Jobs on One Machine to Minimize the Number of Late Jobs," by William L. Maxwell. The paper focused on an integer programming formulation of a one-machine job shop problem. The author contends that Maxwell made in error in proving the validity of an optimal algorithm by applying cutting plane constraints to the problem. The author explains that the problem cannot be solved through traditional cutting plane procedures. The author provides a mathematical model in an attempt to correct the proof.

The paper that I authored and that was published in Management Science in 1969 (Bass 1969) has become widely known as the "Bass Model" (see Morrison and Raju 2004). The model of the diffusion of new products and technologies developed in the paper is one of the most widely applied models in management science. It was especially gratifying for me to learn that INFORMS members have voted the "Bass Model" paper as one of the Top 10 Most Influential Papers published in the 50-year history of Management Science in connection with the 50th anniversary of the journal. In this commentary on the paper I shall discuss some background and history of the development of the paper, the reasons why the model has been influential, some important extensions of the model, some examples of applications, and some examples of the frontiers of research involving the Bass Model. In the current period, in which there is much discussion about the marketing of applications of management science methods and practice, I hope that this commentary will be useful in providing insights about some of the properties of models that will be applied. [ABSTRACT FROM AUTHOR]

Stiving (2000) proposes an interesting model to explain price-endings. His analysis shows that even when customer demand increases at 9-ending price points, certain firms that use high prices to signal quality are more likely to set those prices at round numbers. This comment raises two issues about the model. First, it appears that the original paper imposes a condition that has the effect of eliminating a broad range of legitimate separating equilibria from the analyses. Second, it appears that the original model does not include constraints to ensure that the demand for each market segment will be nonnegative. When these constraints on demand are included, one obtains different aggregate demand curves, which leads to different equilibrium prices. Using the revised model and analysis, we find that 71% of the prices end in 9 and only 12% in 0. This contrasts with only 3% ending in 9 and 58% ending in 0 for the original study. Therefore, 9-endings still prevail even though high prices can be used by firms to signal high quality. [ABSTRACT FROM AUTHOR]

In their paper, "Economic Models for R&D Project Selection in the Presence of Project Interactions," Fox, Baker and Bryant (1984) proposed a model that included benefit interactions, called present value (PV) interactions, between R&D projects. Several computational errors in this paper invalidated the illustrative example which sought to demonstrate that ignoring the PV interactions could result in both nonoptimal project selections and resource allocations. However, a single correction yields an example that supports the authors' central premise. Furthermore, we believe that the model itself can prove useful in real applications. [ABSTRACT FROM AUTHOR]

Many methods have been developed to determine the proper reorder points and order quantities in an inventory system. These methods are based on a wide range of inventory models—from elementary deterministic models to sophisticated probabilistic models with time-varying parameters. This paper deals with two topics related to these calculations which were encountered during the design of an inventory control system for a firm in the heavy goods industry. A mathematical model is developed to describe the average annual variable cost of maintaining the inventory. Based on this model, the paper evaluates the savings obtained by using a simultaneous solution for reorder point and order quantity rather than a simpler separate solution. Then, this model is extended to describe the effect of batch withdrawals as a renewal process. The paper presents an adjustment which can be applied to the original reorder points based on unit withdrawals. Both of these topics are described in the context of a practical application. [ABSTRACT FROM AUTHOR]

Managerial models for practice have undergone remarkable growth in the past 50 years. My paper on decision calculus, published in 1970, was both a progress report and a prescription for improvement. This commentary describes why I wrote the paper, my perception of why it has been considered influential, and a brief overview of what has happened since. The overview starts by tracing the trends and ideas of the 1960s into the 1970s. The 1970s blend easily into the era of decision support systems (DSS). Starting late in the decade and still continuing, DSSs have evolved rapidly due to an explosion of data, increased computer power, and advances in modeling methods. I review highlights of this evolution from the point of view of managerial models, giving special emphasis to marketing, since that has been my window on this world. The good news is that more managers than ever are using models. The bad news is that many managers do not even realize they are using models! (But we should ask whether this is really bad.) The commentary concludes with thoughts about the future of managerial models. The selection of my paper as one of the most influential in the first 50 years of Management Science was a significant honor for which I am grateful. I take it as an indication by the members of INFORMS of the importance to our field of the issues addressed. [ABSTRACT FROM AUTHOR]

There has been recent debate about whether prospect theory can explain the disposition effect. Using both theory and simulation, this paper shows that prospect theory often predicts the disposition effect when lagged expected final wealth is the reference point under the principle of preferred personal equilibrium, regardless of whether the reference point is updated or not. When initial wealth is the reference point, however, there is often no disposition effect. Models that use a reference point with no lag under the principle of preferred personal equilibrium or that determine the reference point using the principle of disappointment aversion cannot explain why the investor bought a stock in the first place. Reference point adjustment weakens the disposition effect, leads to more aggressive initial stock purchase strategies, and predicts history dependence in stock holding. [ABSTRACT FROM AUTHOR]

High-low bidding refers to auctions of a series of objects where for a subset of the auctioned objects one of two buyers bids high on some objects and low on others while the other buyer does the reverse. This paper shows that high-low bidding does not imply collusive behavior among buyers. In particular, through a formal modeling of a noncooperative game of information acquisition and bidding decisions, it shows that high-low bidding can be obtained. The paper also demonstrates that if the cost of information to a seller is less than the equilibrium joint expected information cost of the buyers, then it pays the seller to provide public information. Finally, if the provision of public information is not feasible but a seller can know whether buyers have acquired information, then it pays the seller to make known to the buyers and to pursue a policy that just prior to the start of an auction the seller will announce which buyer has acquired information. [ABSTRACT FROM AUTHOR]

The paper "Asymmetric Information, Incentives and Intrafirm Resource Allocation," by Harris, Kriebel, and Raviv, was published in the June 1982 issue of Management Science. In this article, written as part of this journal's 50-year anniversary celebration, we highlight the significance of the Harris et al. paper for research in managerial accounting. We first formulate and solve a continuous version of the Harris et al. model to illustrate the key assumptions and findings of their paper. We then review several strands of the resource-allocation literature in managerial accounting that have taken their inspiration, either directly or indirectly, from the work of Harris et al. [ABSTRACT FROM AUTHOR]

This paper considers the problem of test design and implementation when testing is imperfect. Items that are classified as conforming may be nonconforming, resulting in a poor outgoing quality level. Items that are classified as nonconforming may be conforming, resulting in excessive scrapping of conforming items. The failed items are commonly retested to reduce the scrapping problem. Alternatively, the accepted items may be retested to improve outgoing quality. In this paper, we examine the question of whether it is better to repetitively test rejected items, or to repetitively test accepted items. We also examine the relationship between the two testing policies, testing equipment accuracy and capacity, incoming quality, and outgoing quality requirements. [ABSTRACT FROM AUTHOR]

This paper investigates equilibrium R&D investment strategies of firms endowed with different innovation potentials. To address this issue, this paper permits two stages of innovation and develops a simple stochastic game model involving two firms. It is shown that in equilibrium, a leader in the multiple stage innovation game invests more than a follower; firms compete more vigorously in the later stages of innovation than in the earlier stages; and a follower is more likely to choose a riskier innovation path than one requiring, on average, equivalent effort. It provides an explanation of how the expected benefits, the cost of R&D, and interactions between competing firms combine to determine dynamic R&D strategies over time. [ABSTRACT FROM AUTHOR]

Zero inventory (ZI) and the related concepts of Just in Time and Kanban are innovative and powerful means to improve production efficiency. This paper applies these concepts to a series facility production system and, in particular, identifies which facilities will never hold inventory irrespective of product demand. Pinpointing beforehand that certain facilities will have no inventory can simplify such strategic decisions as facility design, site location, and space utilization, plus it eases production scheduling. Next, a procedure is developed which increases the number of facilities that will never hold inventory. This procedure implements the ZI philosophy of cutting set up costs to increase efficiency. The results of this paper impact three major areas of production research: (1) strategy and planning—by detecting beforehand facilities that need never hold inventory irrespective of demand; (2) operations—by simplifying day to day production scheduling; and (3) productivity improvement—by cutting set up costs to enhance efficiency. [ABSTRACT FROM AUTHOR]

This paper presents a class of utility functions (class A[sub ∞]) that contains all of the utility functions commonly used for mathematical modeling: the class consisting of those utility functions whose derivatives alternate in sign. A simple representation via mixtures of exponential utilities is provided for this class which is both mathematically convenient and conducive to functional operations. A connection with Laplace transforms and the resultant implications for preference relations, aggregation and utility assessment are discussed. [ABSTRACT FROM AUTHOR]

This paper presents a new technique for forecasting frequencies of events over time for individuals. The technique bases future occurrences on an estimation procedure based on historical data. The estimation procedure incorporates two types of uncertainty: population variation and individual propensity to change. An example is presented. [ABSTRACT FROM AUTHOR]

This paper discusses some current issues in the combination of probabilities and serves as an introduction to a series of four papers and a rejoinder relating to a paper by Morris (1983) on an axiomatic approach to expert resolution. The axiomatic approach and the modeling approach to expert resolution are discussed, and some comments on practical issues are given. [ABSTRACT FROM AUTHOR]

In public policy decision making and in capital planning fractional criterion functions occur. For a given set of desirable target values (goals) τi, this paper develops an algorithm for solving a nonconvex programming problem of the type: Minx∈S Maxi{&phii(fi(x)/gi(x) - τi), i = 1,..., m} where fi are convex functions, gi, are concave functions over the convex subset S of Rn and φi are nondecreasing gauge functions. Here φi(&middot) is the penalty incurred whenever the fractional objective fi/gi deviates from the target value τi, the problem is then to choose an x that minimizes the maximum penalty incurred. [ABSTRACT FROM AUTHOR]

The availability of data regarding variables of interest in forecasting problems is sometimes limited, but experts may possess a great deal of relevant information. The approach taken in this paper involves the development of adaptive forecasting models based on such information. Since the models and their parameters are difficult to consider intuitively, information from the experts is elicited in terms of predictive distributions of the variable to be forecasted. Various models can then be considered, and attempting to "fit" a model to the predictive distributions is analogous to attempting to fit a model to a set of observations. This general approach to forecasting is developed in this paper, and a specific model, a linear model with normally distributed errors, is considered in some detail. An actual application involving the forecasting of fatigue life of asphalt pavements illustrates the development of forecasting models from experts' predictive distributions. [ABSTRACT FROM AUTHOR]

This paper combines two rival preference modeling techniques in a new approach to multi-attribute decision making. Currently existing multi-attribute procedures use either global or local preference modeling. In the global modeling technique, a single preference function is constructed in the large; its maximum is the optimal alternative. In the local procedure, sequential approximations of the preference function are constructed in the small. Each approximation generates a trial solution. Under suitable conditions, each trial solution is preferred to its predecessor, so the trial sequence eventually reaches the optimum. Each technique has advantages and disadvantages; this paper combines the desirable features of both techniques in a new improved method. This new method, called the proxy approach, uses the advantages of one technique to overcome the disadvantages of the other. This paper first develops the theoretical aspects of the proxy approach and then compares it to existing procedures. Finally, the proxy algorithm is applied to a curriculum planning problem and numerous insights are gained. [ABSTRACT FROM AUTHOR]

This paper introduces a solution procedure for solving the project time/cost tradeoff problem of reducing a project duration at a minimum cost. The solution to the time/cost problem is achieved by locating a minimal cut in a flow network derived from the original project network. This minimal cut is then utilized to identify the project activities which should experience a duration modification in order to achieve the total project reduction. The paper will document this cut-based procedure and provide a practical application to a project situation. [ABSTRACT FROM AUTHOR]

Queueing systems with interruptions serve as models for a variety of situations occurring in every day life. Usually, for each type of interruption, a separate queueing analysis is required. In this paper we present a single queueing model which can be used to analyze many such systems. The model is in the form of an approximation that is based upon several parameters, which reflect the particular queueing system under consideration. Applications to queueing systems with priorities and breakdowns are given in the paper. [ABSTRACT FROM AUTHOR]

This paper extends the Bierman-Hausman credit-granting model by proving that although the distribution on the probability of collection in the case of failure is no longer a conjugate Beta, it remains tractable; the model therefore need no longer be terminated in the case of failure. Further theorems on the structure of optimal policies, which result in a considerable reduction of the dynamic programming state space, are then presented, and the paper concludes with a discussion of extensions and applications. [ABSTRACT FROM AUTHOR]

Personal, or subjective, probabilities are used as inputs to many inferential and decision-making models, and various procedures have been developed for the elicitation of such probabilities. Included among these elicitation procedures are scoring rules, which revolve the computation of a score based on the assessor's stated probabilities and on the event that actually occurs. The development of scoring rules has, in general, been restricted to the elicitation of discrete probability distributions. In this paper, families of scoring rules for the elicitation of continuous probability distributions are developed and discussed. [ABSTRACT FROM AUTHOR]

Gaming and simulation mean different things to different people. Currently there exist separate schools of individuals working on interrelated but basically different areas. Each has its own special goals and terminology. Yet there is a sufficient overlap among them that it is important to clarify the common and different interests and terminology. The general topic of gaming is ripe for an examination to see to what extent there exists a basic methodology and theory of gaming. This paper addresses itself, in part, to this problem. Different types of games and different purposes are discussed. It is stressed that there is not one validation problem but many validation and specification problems which must be addressed if professional standards are to be attained. [ABSTRACT FROM AUTHOR]

This paper explores several important notions relevant to modern utility theory. Restricting the discussion to the consideration of bivariate utility functions, the paper defines and examines the interrelationships between (1) independence in the utility sense, (2) trade-off or indifference curves, and (3) transformation curves (as defined herein). Following the form in which a set of basic axioms of utility are stated, independence is defined in terms of indifference between 50-50 gambles, and it is shown that, if the condition of the definition holds, then φ (x, y), the bivariate utility function, can be written as a function of x plus a function of y. The concepts of trade-off curve (indifference curve) and transformation curve are also defined on the basis of the indifference relation but are not concerned with gambles. After exploring relationships among the three notions it is shown how the utility curves for the two variables under independence can be constructed on the basis of two trade-off curves. [ABSTRACT FROM AUTHOR]

In an earlier paper ("Some Models of Inventory and an Application", Management Science, Vol. 2, No. 4, July, 1956) the author analyzed four inventory systems which were referred to as Models I, II, III, IV. In the present paper the notion of equivalence of inventory systems is introduced and it is shown that Models I and II are equivalent and so are models III and IV. The results are also extended to systems with non-zero leadtime. In all cases considered it is shown that the total expected costs of the systems (with or without leadtime) can be expressed in the form c1 ∫0S (S - r)f(r) dr + c2 ∫ S ∞ (r - S)f(r) dr. [ABSTRACT FROM AUTHOR]

Science and technology advances drive firms to continually enhance their product's performance and launch sequentially improving offerings. Firms face challenges in marketing such improving products to well informed,forward-looking consumers who anticipate product improvements and seek to delay their purchase timing. Product design, specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded, can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence. However, such an architecture-based approach can present new challenges as well, and dealing with them requires carefully coordinated cross-functional decision making by the firm. In this paper, we identify and formalize the notion of design inconsistency, which refers to the monopolist firm's inability to commit to future product design architectures. We find that firms experience design inconsistency even when they are able to commit to future prices, and design inconsistency lowers firm profits as well as consumer surplus. We then derive a joint product architecture and pricing approach to solve this problem; this enables an innovating firm to optimally and in a time-consistent manner launch modular upgradable products. The modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation. [ABSTRACT FROM AUTHOR]

This paper introduces time-tradeoff (TTO) sequences as a general tool to analyze intertemporal choice. We give several applications. For empirical purposes, we can measure discount functions without requiring any measurement of or assumption about utility. We can quantitatively measure time inconsistencies and simplify their qualitative tests. TTO sequences can be administered and analyzed very easily, using only pencil and paper. For theoretical purposes, we use TTO sequences to axiomatize (quasi-)hyperbolic discount functions. We demonstrate the feasibility of measuring TTO sequences in an experiment, in which we tested the axiomatizations. Our findings suggest rejections of several currently popular discount functions and call for the development of new ones. It is especially desirable that such discount functions can accommodate increasing impatience. [ABSTRACT FROM AUTHOR]

In developing industries, firms have to decide whether and when to enter the market depending on the state of demand, existing firms in the industry, and the firm's capabilities. This paper investigates a model of increasing demand, in which firms decide when to enter the market anticipating the strategic behavior of other potential entrants, and the effects of entry on future potential entrants. This paper shows that the ability of early entry to deter future competitors' entry leads firms to enter the market at a rate faster than demand is expanding. If there is the potential for many firms to enter the market, firms may be less likely to enter because of future competitor entry to correct any market opportunities. If firms enter the market depending on their fixed capabilities rather than depending on the firm's circumstances at each moment in time, firms end up entering the market at a faster rate in the early periods. [ABSTRACT FROM AUTHOR]

This paper presents a discrete-time method (ET method) for pricing path-dependent securities by the supplementary variable technique and examines the ET method from the point of view of Arrow­Debreu event tree. In particular, this paper identifies sufficient conditions on supplementary variables under which the ET method yields the same price for a path-dependent security as a valuation method based on a comparable Arrow­Debreu event tree. Two examples are provided to illustrate the ET method. The first example is a valuation of collateralized mortgage obligations (CMOs), where the collateral of a CMO is modeled as a pool of mortgage loans with heterogeneous prepayment costs. The second example is a valuation of American average options where the average is computed over a moving period with a fixed length. In addition, this paper presents a measure for the computational size of the ET method and illustrates numerical advantages of the ET method with examples. [ABSTRACT FROM AUTHOR]

Trace-driven (or correlated inspection) simulation means that the simulated and the real systems have some common inputs (say, historical arrival times) so that the two systems' outputs are cross-correlated. To validate such a simulation, this paper focuses on the difference between the average simulated and real responses. To evaluate this validation statistic, the paper develops a novel bootstrap technique--based on replicated runs. This validation statistic and the bootstrap technique are evaluated in extensive Monte Carlo experiments with specific single-server queues. These experiments show acceptable Type-I and Type-II error probabilities. [ABSTRACT FROM AUTHOR]

This paper proposes a two-step method to successively elicit utility functions and decision weights under rank-dependent expected utility theory and its "more descriptive" version: cumulative prospect theory. The novelty of the method is that it is parameter-free, and thus elicits the whole individual preference functional without imposing any prior restriction. This method is used in an experimental study to elicit individual utility and probability weighting functions for monetary outcomes in the gain and loss domains. Concave utility functions are obtained for gains and convex utility functions for losses. The elicited weighting functions satisfy upper and lower subadditivity and are consistent with previous parametric estimations. The data also show that the probability weighting function for losses is more "elevated" than for gains. [ABSTRACT FROM AUTHOR]

This paper develops a framework for modelling risky debt and valuing credit derivatives that is flexible and simple to implement, and that is, to the maximum extent possible, based on observables. Our approach is based on expanding the Heath-Jarrow-Morton term-structure model to allow for defaultable debt. Rather than follow the procedure of implying out the behavior of spreads from assumptions concerning the default process, we work directly with the evolution of spreads. The risk-neutral drifts in the resulting model possess a recursive representation that facilitates implementation and makes it possible to handle path-dependence and early exercise features without difficulty. The framework permits embedding a variety of specifications for default; we present an empirical example of a default structure which provides promising calibration results. [ABSTRACT FROM AUTHOR]

Consider a supply chain consisting of two independent agents, a supplier (e.g., a manufacturer) and its customer (e.g., a retailer), the latter in turn serving an uncertain market demand. To reconcile manufacturing/procurement time lags with a need for timely response to the market, such supply chains often must commit resources to production quantities based on forecasted rather than realized demand.The customer typically provides a planning forecast of its intended purchase, which does not entail commitment. Benefiting from overproduction while not bearing the immediate costs, the customer has incentive to initially overforecast before eventually purchasing a lesser quantity. The supplier must in turn anticipate such behavior in its production quantity decision. This individually rational behavior results in an inefficient supply chain.This paper models the incentives of the two parties, identifying causes of inefficiency and suggesting remedies. Particular attention is given to the Quantity Flexibility (QF) contract, which couples the customer's commitment to purchase no less than a certain percentage below the forecast with the supplier's guarantee to deliver up to a certain percentage above. Under certain conditions, this method can allocate the costs of market demand uncertainty so as to lead the individually motivated supplier and customer to the systemwide optimal outcome. We characterize the implications of QF contracts for the behavior and performance of both parties, and the supply chain as a whole. [ABSTRACT FROM AUTHOR]

This paper develops a skewed extension of the generalized t (GT) distribution, introduced by McDonald and Newey (1988). In particular, the paper derives the mathematical moments and other properties of the distribution and assesses its ability to fit the empirical distribution of several financial series characterized by skewness and excess kurtosis. In all cases the skewed GT provides an excellent fit to the empirical distribution of data. [ABSTRACT FROM AUTHOR]

In analyzing bidding, modeling matters. This paper is a critical analysis of the models available to aid competitive bidding decision making--bidding strategy and auction design--in real transactions. After an introductory overview, this paper describes the contexts in which auctions arise, reviews the "mainstream" theory of single, isolated auctions and discusses the important work involved in enrichment of this theory. In doing so, it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments. The paper summarizes briefly what is known about the direct use of models by bidders and auction designers. A general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making. [ABSTRACT FROM AUTHOR]

This paper compares the performances of two well-known Monte Carlo procedures for estimating an unknown quantity as the size of the problem grows. One method based on the standard Monte Carlo approach generates K i.i.d, data points. The other derives its data from a single K-step sample path generated by a Markov chain. The paper gives necessary and sufficient conditions for the Markov chain approach to perform more efficiently than the standard Monte Carlo approach does. Moreover, it identifies circumstances under which this better efficiency grows with increasing problem size. This improved efficiency comes from reduced sample generating and function evaluating costs in the Markov chain approach that more than compensate for the increased variance of the estimator that the Markov chain sampling approach induces when compared to the standard Monte Carlo approach. Several examples illustrate how the benefits arise; one also demonstrates a case in which the standard Monte Carlo approach becomes increasingly preferred as the problem size grows. [ABSTRACT FROM AUTHOR]

Utilizing a cyclic queue system, this paper investigates the effect of variance on a multi-item production facility. The variance of setup time, service rate and arrival rate is shown to have a powerful and sometimes paradoxical influence. Reduction in setup time, for example, is usually presumed to reduce inventory. We demonstrate that inventory can blow up if setup time is cut. Another paradoxical effect of variance is on processing rate. Speeding up the processing rate should reduce the material waiting to be processed. Again we show that the opposite can hold. Other properties of variance are examined, such as its relationship to KAIZEN and Just-In-Time production practices, and especially its property of impairing capacity. [ABSTRACT FROM AUTHOR]

Consider a system with N processors and two job types with one having preemptive priority over the other. Arrivals are Poisson and service times are exponential. We present two approaches for modeling the system. The difference between the two lies in the order with which we list the numbers of jobs of each type in the system in the state definition. Although both approaches yield matrix-geometric solutions, their implications for computation are significantly different. The first approach has attractive structural properties and an easily solvable rate matrix, but the system of equations at the boundary is most often prohibitively large. The second approach, while not amenable to any easy computation of its rate matrix, renders itself to an efficient solution at the boundary, and provides a basis for waiting time analysis for low priority jobs. In the paper, we present an efficient implementation of state reduction for solving the stationary probabilities associated with the boundary states. We give a numerical example to highlight various issues in the computer solution. [ABSTRACT FROM AUTHOR]

The purpose of the paper is to present the results of a comparative analysis of two main-line productivity measurement procedures: the American Productivity Center's total factor model, and the Ethyl Corporation's "Profitability = Productivity + Price Recovery" model. Several fundamental differences between the two approaches are identified and analyzed. As demonstrated in the paper, differences such as the method of deflation can substantially affect the proper choice of the more appropriate procedure to use in a given corporate setting. [ABSTRACT FROM AUTHOR]

In this paper we study how natural resource development contracts depend on the level of bargaining power of Trans National Corporations (Agents) and host country governments (Principal). We concentrate on share contracts where a portion of the net firm income from resource development is transferred to the government, and show that (i) as the number of agents increase, the principal receives a greater share; (ii) if either player is able to threaten the other, the threatening player receives a greater share, and (iii) if the principal shares in production costs, he obtains a greater share. These results would generally be invariant if the principal was less risk averse than the agent. [ABSTRACT FROM AUTHOR]

Classical Economic Manufacturing Quantity (EMQ) models have usually ignored the possibility of process deterioration and the existence of defective items in the production lot. Moreover, the use of machine inspection for maintenance and restoration purposes has not been considered. On the other hand, past studies on maintenance models do not consider the length of a production run to be a decision variable. This paper addresses the problem of joint control of production cycles or manufacturing quantities and maintenance by inspection. A simple relationship has been developed to determine the effectiveness of maintenance by inspection. Furthermore, when maintenance by inspection is adopted, it is shown that the optimal inspection intervals are equally-spaced. The problem of simultaneous determination of EMQ and the inspection schedules is solved by using an approximation to the cost function. The resulting EMQ is found to be an adjustment to the classical EMQ. Finally, the relationships between different parameter values and the magnitudes of the cost penalty for using the classical EMQ are examined. [ABSTRACT FROM AUTHOR]

A common myth/conception, based upon the notion of increasing returns to scale in R&D activity, is that large firms account for a disproportionate share of innovations. In this paper we consider three types of informational returns to scale (cheaper, faster, and better) and examine the impact of each on the timing of the firm's innovation decision. Contrary to popular conception, the decision is made later when information is cheaper, and the change in timing is unsignable in the case of faster arrival of information. Only more accurate (better) information leads to earlier decisions. [ABSTRACT FROM AUTHOR]

In this paper we consider a single product multi-period inventory problem for which the penalty cost consists of two parts, a lump-sum portion which is independent of the size of the shortage and a portion which is linear in the size of the shortage. We show that for all nonincreasing demand density functions, the expected total cost function is K-convex and hence, there is an optimal policy for the n-period problem that is (s, S). [ABSTRACT FROM AUTHOR]

Compound option valuation formulae give rise to the summation of a series of multinormal distribution functions. This paper presents an identity on sums of nested multinormal distributions of arbitrary dimension. We show that this identity generalizes some well-known low order identities for the multinormal distribution. We present three applications of the new identity to contingent claims valuation problems. The first and second applications show that by reducing significantly the number of integrals to be evaluated, faster and more accurate algorithms can be developed for implementing the Geske-Johnson American put valuation formula and the Roll-Geske-Whaley American call formula; the third gives new economic insights into the valuation of disaggregated coupon bonds. [ABSTRACT FROM AUTHOR]

In many manufacturing problems, the total lead time taken to manufacture a product is an important consideration. Long lead times impose costs due to higher work-in-process inventory, increased uncertainty about requirements, larger safety stocks and poorer performance to due dates. Traditional lot sizing models ignore lead time related costs, although there are systematic relationships between lot sizes and lead times. This paper examines these relationships and their implications for lot sizing and work-in-process inventories, for batch manufacturing shops with queues. [ABSTRACT FROM AUTHOR]

The multilocation inventory problem can be thought of naturally as an extension of the single location "newsboy" problem to multiple locations with transshipment possible between locations. Previous work has established the form of optimal policies; however, computational results have been limited to the one-period case or to special structures. This paper develops lower- and upper-bounds for the general multiperiod problem. These also suggest approximations to the optimal solution. Computational methods are discussed and tested on small problems. [ABSTRACT FROM AUTHOR]