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We experimentally investigate a repeated "inspection game" where, in the stage game, an employee can either work or shirk and an employer simultaneously chooses to inspect or not inspect. The unique equilibrium of the stage game is in mixed strategies with positive probabilities of shirking/inspecting while combined payoffs are maximized when the employee works and the employer does not inspect. We examine the effects of allowing the employer discretion to sanction or reward the employee after observing stage game payoffs. When employers have limited discretion, and can only apply sanctions and/or rewards following an inspection, we find that both instruments are equally effective in reducing shirking and increasing joint earnings. When employers have discretion to reward and/or sanction independently of whether they inspect, we find that rewards are more effective than sanctions. In treatments where employers can combine sanctions and rewards, employers rely mainly on rewards, and outcomes closely resemble those of treatments where only rewards are possible. [ABSTRACT FROM AUTHOR]

Gender differences in the willingness to compete have been identified as one important factor in explaining gender differences in labor markets and within organizations. We present three experiments with a total of 1,570 subjects, ages three to 18 years, to investigate the origins of this gender gap. In a between-subjects design we find that boys are more likely to compete than girls as early as kindergarten and that this gap prevails throughout adolescence. Re-examining the behavior of 316 subjects in a within-subjects design two years later, we show that these gender differences also largely persist over a longer time period and can thus be considered stable. Controlling for subjects' abilities in the different tasks, their risk attitudes, and expected performance, the gender gap in the willingness to compete is estimated in the range of 10-20 percentage points. We discuss the implications of our findings for policy interventions and organizational management. [ABSTRACT FROM AUTHOR]

We study a model of a firm managing its inventory of a single product by sourcing supplies from two supply sources, a regular supplier who offers a lower unit cost and a longer lead time than a second, emergency, supplier. A practically implementable policy for such a firm is a tailored base-surge (TBS) policy [Allon G, Van Mieghem JA (2010) Global dual sourcing: Tailored base-surge allocation to near- and offshore production. Management Sci. 56(1):110-124] to manage its inventory. Under this policy, the firm procures a constant quantity from the regular supplier in every period and dynamically makes procurement decisions for the emergency supplier. Allon and Van Mieghem describe this practice as using the regular supplier to meet a base level of demand and the emergency supplier to manage demand surges, and they conjecture that this practice is most effective when the lead time difference between the two suppliers is large. We confirm these statements in two ways. First, we show the following analytical result: when demand is composed of a base demand random component plus a surge demand random component, which occurs with a certain small probability, the best TBS policy is close to optimal (over all policies) in a well-defined sense. Second, we also numerically investigate the cost effectiveness of the best TBS policy on a test bed of problem instances. The emphasis of this investigation is the study of the effect of the lead time difference between the two suppliers. Our study reveals that the cost difference between the best TBS policy and the optimal policy decreases dramatically as the lead time of the regular supplier increases. On our test bed, this cost difference decreases from an average (over the test bed) of 21% when the lead time from the regular supplier is two periods (the emergency supplier offers instant delivery) to 3.5% when that lead time is seven periods. [ABSTRACT FROM AUTHOR]

We conduct experiments measuring individual behavior under compound risk, simple risk, and ambiguity. We focus on (1) treatment of compound risks relative to simple risks and (2) the relationship between compound risk attitudes and ambiguity attitudes. We find that compound risks are valued differently than corresponding reduced simple risks. These differences measure compound risk attitudes. These attitudes display more aversion as the reduced probability of the winning event increases. Like Halevy [Halevy Y (2007) Ellsberg revisited: An experimental study. Econometrica 75:503-536], we find an association between compound risk reduction and ambiguity neutrality. However, in contrast to the almost perfect identification in Halevy's data, we find a substantially weaker relation in both directions. First, a majority of our ambiguity-neutral subjects fail to reduce compound risk. Second, almost a quarter of our subjects who reduce compound risk are nonneutral to ambiguity. All of the latter come from the more quantitatively sophisticated part of our subject pool. [ABSTRACT FROM AUTHOR]

We present a theoretical account of the origin of the shapes of utility, probability weighting, and temporal discounting functions. In an experimental test of the theory, we systematically change the shape of revealed utility, weighting, and discounting functions by manipulating the distribution of monies, probabilities, and delays in the choices used to elicit them. The data demonstrate that there is no stable mapping between attribute values and their subjective equivalents. Expected and discounted utility theories, and also their descendants such as prospect theory and hyperbolic discounting theory, simply assert stable mappings to describe choice data and offer no account of the instability we find. We explain where the shape of the mapping comes from and, in describing the mechanism by which people choose, explain why the shape depends on the distribution of gains, losses, risks, and delays in the environment. [ABSTRACT FROM AUTHOR]

I study a model of investment and sale of ideas and test its empirical implications using a novel data set from the market for original movie ideas. Consistent with the theoretical results, I find that buyers are reluctant to meet unproven sellers for early-stage ideas, which restricts sellers to either developing the ideas fully (to sell them later) or abandoning them. In contrast, experienced sellers can attract buyers at any stage, and they sell worse ideas sooner and better ideas later. These results have important managerial implications for buyers and sellers and show that, in such contexts, policy interventions that discourage buyer participation--such as stronger intellectual property protection--may diminish the market for ideas and hurt inexperienced sellers. [ABSTRACT FROM AUTHOR]

Guided by theories of "management by exception," we study the impact of information and communication technology on worker and plant manager autonomy and span of control. The theory suggests that information technology is a decentralizing force, whereas communication technology is a centralizing force. Using a new data set of American and European manufacturing firms, we find indeed that better information technologies (enterprise resource planning (ERP) for plant managers and computer-assisted design/computer-assisted manufacturing for production workers) are associated with more autonomy and a wider span of control, whereas technologies that improve communication (like data intranets) decrease autonomy for workers and plant managers. Using instrumental variables (distance from ERP's place of origin and heterogeneous telecommunication costs arising from regulation) strengthens our results. [ABSTRACT FROM AUTHOR]

Refining is indispensable to almost every natural-resource-based commodity industry. It involves a series of complex processes that transform inputs with a wide range of quality characteristics into refined finished products sold to end markets. In this paper, we take the perspective of a profit-maximizing refiner that considers upgrading its existing simple refinery to include intermediate-conversion flexibility, i.e., the capability of converting heavy intermediate components to light ones. We present a stylized two-stage stochastic programming model of a petroleum refinery to investigate the value drivers of conversion flexibility and the impact of input and output market conditions on its economic potential. Conversion flexibility adds value to refineries by either transforming a nonprofitable situation into a profitable one (referred to as purchase benefit) or improving profitability of an already profitable situation (referred to as unit revenue benefit). In a real-data-calibrated numerical study, we find the value of conversion flexibility (VoC) to be significant, accounting for 40% of the expected profit with conversion, and the purchase benefit and unit revenue benefit are equally important. Contrary to the intuition that, as a recourse action, conversion offers higher value for greater input price volatility, we find that VoC may decrease in input price volatility as a result of the differential impacts of increasing price volatility on the purchase benefit and the unit revenue benefit. Refineries also vary in their range flexibility, i.e., the ability to accommodate a narrow or wide range of inputs of different quality levels. Whether the range flexibility increases or decreases the value of conversion flexibility is affected by the direction in which the refinery expands its processing range and the heaviness of crude oils. [ABSTRACT FROM AUTHOR]

Some luxury goods manufacturers offer limited editions of their products, whereas some others market multiple product lines. Researchers have found that reference groups shape consumer evaluations of these product categories. Yet little empirical research has examined how reference groups affect the product line decisions of firms. Indeed, in a field setting it is quite a challenge to isolate reference group effects from contextual effects and correlated effects. In this paper, we propose a parsimonious model that allows us to study how reference groups influence firm behavior and that lends itself to experimental analysis. With the aid of the model, we investigate the behavior of consumers in a laboratory setting where we can focus on the reference group effects after controlling for the contextual and correlated effects. The experimental results show that in the presence of strong reference group effects, limited editions and multiple products can help improve firms' profits. Furthermore, the trends in the purchase decisions of our participants point to the possibility that they are capable of introspecting close to two steps of thinking at the outset of the game and then learning through reinforcement mechanisms. [ABSTRACT FROM AUTHOR]

It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? The supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling to many (possibly competing) retailers. We find that some key conclusions from those market structures do not apply in our setting, where multiple manufacturers sell through a single retailer. We allow the manufacturers to compete for the retailer's business using one of three types of contracts: a wholesale-price contract, a quantity-discount contract, or a two-part tariff. It is well known that the latter two, more sophisticated contracts enable the manufacturer to coordinate the supply chain, thereby maximizing the profits available to the firms. More importantly, they allow the manufacturer to extract rents from the retailer, in theory allowing the manufacturer to leave the retailer with only her reservation profit. However, we show that in our market structure these two sophisticated contracts force the manufacturers to compete more aggressively relative to when they only offer wholesale-price contracts, and this may leave them worse off and the retailer substantially better off. In other words, although in a serial supply chain a retailer may have just cause to fear quantity discounts and two-part tariffs, a retailer may actually prefer those contracts when offered by competing manufacturers. We conclude that the properties a contractual form exhibits in a one-manufacturer supply chain may not carry over to the realistic setting in which multiple manufacturers must compete to sell their goods through the same retailer. [ABSTRACT FROM AUTHOR]

Decision makers sometimes have to choose between alternative options about which they have no preference: either they judge the options equally valuable (indifference) or they have no judgment about their relative value (noncomparability). Choosing randomly is generally considered a natural way to deal with such situations. This paper shows, however, that systematic randomization between noncomparable options may lead to a chain of decisions resulting in monetary losses (a money pump). Furthermore, these losses can be avoided by deliberately selecting one of the noncomparable options instead of randomizing. Thus, randomization among noncomparable options is costly relative to deliberate selection. On the other hand, randomization among indifferent options is costless relative to deliberate selection. [ABSTRACT FROM AUTHOR]

Using novel data on European firms, this paper investigates the relationship between business groups and innovation. Controlling for various firm characteristics, we find that group affiliates are more innovative than standalones. We examine several hypotheses to explain this finding, focusing on group internal capital markets and knowledge spillovers. We find that group affiliation is particularly important for innovation in industries that rely more on external funding and in groups with more diversified capital sources, consistent with the internal capital markets hypothesis. Our results suggest that knowledge spillovers are not the main driver of innovation in business groups because firms affiliated with the same group do not have a common research focus and are unlikely to cite each other's patents. [ABSTRACT FROM AUTHOR]

Product architecture and organizational communication play significant roles in complex product development efforts. By using networks to characterize both product structure and communication patterns, we examine the impact of mismatches between these on new product development (NPD) performance. Specifically, we study the vehicle development process of a major auto company and use vehicle quality (warranty repairs) as our NPD performance metric. Our empirical results indicate that centrality in a product architecture network is related to quality according to an inverted-U relationship, which suggests that vehicle subsystems of intermediate complexity exhibit abnormally high levels of quality problems. To identify specific subsystems in danger of excessive quality problems, we characterize mismatches between product architecture and organizational structure by defining a new metric, called coordination deficit, and show that it is positively associated with quality problems. These results deepen our understanding of the impact of organizational structure and product architecture on the NPD process and provide tools with which managers can diagnose and improve their NPD systems. [ABSTRACT FROM AUTHOR]

We consider the optimal production and inventory control of an assemble-to-order system with m components, one end-product, and n customer classes. A control policy specifies when to produce each component and, whenever an order is placed, whether or not to satisfy it from on-hand inventory. We formulate the problem as a Markov decision process and characterize the structure of an optimal policy. We show that a base-stock production policy is optimal, but the base-stock level for each component is dynamic and depends on the inventory level of all other components (more specifically, it is nondecreasing). We show that the optimal inventory allocation for each component is a rationing policy with different rationing levels for different demand classes. The rationing levels for each component are dynamic and also nondecreasing in the inventory level of all other components. We compare the performance of the optimal policy to heuristic policies, including the commonly used base-stock policy with fixed base-stock levels, and find them to perform surprisingly well, especially for systems with lost sales. [ABSTRACT FROM AUTHOR]

We analyze the effect of managerial compensation schemes and organizational structure on competitive behavior in imperfectly competitive product markets. Previous research suggests that in cases of strategic substitutability, firms tend to choose organizational structures and compensation systems that commit the firm to behaving aggressively in the product market, reducing firm and industry profits. In contrast, we show that while compensation and structure in isolation lead to excessive aggressiveness, the combination of these two internal choice variables may reverse the outcome--organizational design can be used as a commitment device to reduce competitive rivalry. Finally, we find that in equilibrium, firms may choose to be different; one firm is decentralized and uses incentives that commit it to being aggressive, while the other is centralized and uses incentives that commit it to being soft. Hence, endogenous firm heterogeneity in the form of organizational differentiation allows firms to avoid a mutually detrimental outcome. [ABSTRACT FROM AUTHOR]

Motivated by applications in the manufacturing and service industries, we consider two models for coordinating scheduling with lead-time quotation: a basic model with a single customer type, and an enhanced model where an additional second customer type expects immediate service or production In both models, revenues obtained from the customers are sensitive to the lead time, there is a threshold of lead time above which the customer does not place an order, and the quoted lead times are 100% reliable. These models are related to well-known scheduling problems, which have been studied in both offline and online settings. We introduce the immediate quotation case and study it with the (traditional) online version. We provide complexity results for the offline case, and perform competitive analysis for the online cases. A natural question of bridging the gap between the online and quotation models leads us to the delayed quotation model, which we study briefly. The analysis of these models provides useful qualitative insights as well. [ABSTRACT FROM AUTHOR]

This paper describes a novel theoretical and empirical approach to tasks such as business process redesign and knowledge management. The project involves collecting examples of how different organizations perform similar processes, and organizing these examples in an on-line "process handbook." The handbook is intended to help people: (1) redesign existing organizational processes, (2) invent new organizational processes (especially ones that take advantage of information technology), and (3) share ideas about organizational practices.A key element of the work is an approach to analyzing processes at various levels of abstraction, thus capturing both the details of specific processes as well as the "deep structure" of their similarities. This approach uses ideas from computer science about inheritance and from coordination theory about managing dependencies. A primary advantage of the approach is that it allows people to explicitly represent the similarities (and differences) among related processes and to easily find or generate sensible alternatives for how a given process could be performed. In addition to describing this new approach, the work reported here demonstrates the basic technical feasibility of these ideas and gives one example of their use in a field study. [ABSTRACT FROM AUTHOR]

We incorporate information flow between a supplier and a retailer in a two-echelon model that captures the capacitated setting of a typical supply chain. We consider three situations: (1) a traditional model where there is no information to the supplier prior to a demand to him except for past data; (2) the supplier knows the (s, S) policy used by the retailer as well as the end-item demand distribution; and (3) the supplier has full information about the state of the retailer. Order up-to policies continue to be optimal for models with information flow for the finite horizon, the infinite horizon discounted and the infinite horizon average cost cases. Study of these three models enables us to understand the relationships between capacity, inventory, and information at the supplier level, as well as how they are affected by the retailer's (S - s) values and end-item demand distribution. We estimate the savings at the supplier due to information flow and study when information is most beneficial. [ABSTRACT FROM AUTHOR]

Since the early 1980s, the diffusion of Just-In-Time (JIT) manufacturing from Japanese manufacturers to U.S. manufacturers has progressed at an accelerated rate. At this stage of the diffusion process, JIT implementations are more common and more advanced in large U.S. manufacturers than in small; consequently, U.S. businessmen's understanding of issues associated with JIT implementations in large manufacturers is more developed than that of small manufacturers. When small manufacturers represent about 96 percent of all U.S. manufacturers, investigation of JIT implementations in small, as well as large, manufacturers is warranted.This survey Study investigates JIT implementation differences between small and large U.S. manufacturers. Ten management practices that constitute the JIT concept are used to examine implementation of JIT manufacturing systems. Odds ratio were constructed to determine if an association exists between implemented versus not implemented and manufacturer size for each JIT practice. Ten changes in performance attributed to JIT implementation are also assessed and examined in the study. Logistic regression models are used to examine the relationships between implementation status of each of the JIT practices and of each of the changes in performance in small and large manufacturers. The results of the study show that the frequencies of the 10 JIT management practices implemented differ between the two groups of manufacturer size, and an association exists between the JIT practices implemented and manufacturer size. Moreover, the changes in performance attributed to JIT implementation vary, depending on implementation status of specific JIT management practices and manufacturer size.(Empirical Study; Just-in-time Manufacturing; Performance; Manufacturer Size; Logistic Regression) [ABSTRACT FROM AUTHOR]

Incentive plans are an integral part of management control since incentives as measures of recognition of performance are significant motivating factors for corporate executives. In this paper we describe how such incentive plans can be devised. We employ multiattribute preference theory in the design of incentive plans. The basic idea is to state empirically verifiable conditions on the decision maker's preferences that imply some particular form of the incentive function. First, we show how an incentive plan can be devised when incentive compensation to managers is based on their actual performance on some predetermined criteria. Next, we consider goal-based plans that encourage managers to set accurate goals and motivate them to strive for a better performance subsequent to goal setting. Finally, we extend the goal-based plans to include situations in which the goals are reported probabilistically. Several suggestions for further research are also provided. [ABSTRACT FROM AUTHOR]

A quantitative comparison between three types of capacity planning or shop loading techniques is presented. The results were obtained through system that will control and schedule jobs in a job shop environment requires three major components. Initially, a well-defined and properly updated data base consisting of routings, bills of material and status of orders has to be established. The second component should be a capacity planning or loading component that can provide an accurate forecast of toads for each time period for each work center. [ABSTRACT FROM AUTHOR]

Methods of planning based on systems ideas, behavioral science concepts, and heuristics were used to develop plans in a field setting, to contrast the merits of these planning approaches. Plans were evaluated by experts as well as decision makers and staff in the participating organization. Criteria such as quality, acceptance, and measures of innovation were used to contrast the plans. The perceptions of agency representatives that participated in the planning groups were also obtained. The systems method used planning groups that were composed solely of experts. in the systems method, objectives were established in the first phase of the meeting, and used as a basis to structure the development of plans. For example, the intent of the service delivery plan was established before recommendations were developed. The behavioral approach used clients, the recipients of the service to be planned, as planning groups members. These groups developed a list of priority client problems which were used as a focus to formulate plans. The heuristic approach was applied to simulate trial and error planning. In this approach, no structure was used in the generation of plan components, the leader merely recorded the ideas that were stimulated by a statement or the problem. In the heuristic approach, half the planning groups had just clients as members and the rest were made up of experts. The three methods of planning were applied to two problems-the development of plans for primary health care services, and home health care delivery mechanisms. In all, twelve distinct planning groups participated permitting a replication of each "problem-planning topic" contrast. The results of the experiment indicated that the systems approach produced better quality plans while the behavioral approach produced more new ideas. This suggests that involving an organization's client in planning of services to define their problems provides a rich array of ideas for the planning process, but that systems approaches and experts are needed to formulate these ideas and consolidate them into a viable plan. However, the participants found their experiences to be significantly less satisfactory when a systems approach was used. Several other implications of these findings for planning practice are discussed. [ABSTRACT FROM AUTHOR]

Past practices in measuring performance in complex management games are reviewed. Focus is directed to the controversy of objective measurement of profit-ability versus decision and analysis input evaluation. As a middle ground between these extremes, a multi-dimensional approach to the evaluation problem was developed for teams competing in a simulation game. Multi-dimensional performance criteria provide a means to increase learning effectiveness by reducing feedback ambiguity and providing a vehicle for the student to understand the cause-effect relationships inherent in the game and the business environment. This paper describes the development and usage of thirteen performance criteria, and also utilizes the technique of path analysis to investigate the relationships among the performance variables. The results of the path analysis indicated both that teams which forecasted accurately were top performers in terms of profitability and that a consistent and logical relationship existed among the performance variables. These findings, though an indirect measure, contribute to confidence in the internal construct validity of the game. [ABSTRACT FROM AUTHOR]

Connora et al. [3], have developed a Distribution System Simulator (DSS) that produces a customised simulation model for large scale, physical distribution systems. Aggarwal [1] provided a critique of specific topics regarding DSS design in order to make it more effective in an operating environment. Rather than dealing with detailed issues, I would like to take an overall look at the approach suggested by Connora et al. to support logistics decisions, emphasising general strengths and limitations of their proposed system, and to recommend some constructive ideas to overcome some of the current DSS weaknesses. [ABSTRACT FROM AUTHOR]

In this paper a periodic review stock system using the so-called (S, s) ordering policy is considered. New and more accurate approximations are found for calculating the optimal values of the reorder point s and the minimum order quantity Δ = S - s. When demands are normally distributed it is shown that the six cost and distribution parameters associated with these approximations can be combined into two effective parameters. This facilitates the derivation of two graphs which can be used with some relatively simple computational procedures to determine approximate optimal values for the reorder point s and minimum order quantity Δ. [ABSTRACT FROM AUTHOR]

An exploratory search for explanations of mismanagement of renewable resources, other than the theory of the commons, was performed by an experiment. Eighty three subjects, mostly recruited from the fisheries sector in Norway, were asked to manage the same simulated virgin fish stock, one subject at a time. Exclusive property rights were granted to rule out the commons problem. Despite perfect property rights, subjects consistently overinvested, leading to an average overcapacity of 60%. The resource was reduced by an average of 15% below its optimal level. Overcapacity and tough "quotas" resemble the situation in Norwegian and other fisheries during the past few decades. The likely explanation of the observed behaviour is misperception of feedback, a phenomenon that occurs in many experimental studies of dynamically complex systems. Such misperceptions add a new and important dimension to the problem of renewable resource management, beyond the commons problem. [ABSTRACT FROM AUTHOR]

Firms choose strategies based on their attributes and industry conditions; therefore, strategy choice is endogenous and self-selected. Empirical models that do not account for this and regress performance measures on strategy choice variables are potentially misspecified and their conclusions incorrect. I highlight how self-selection on hard-to-measure or unobservable characteristics can bias strategy performance estimates and recommend an econometric technique that has been developed to account for this effect. Although this concern applies to a wide range of strategy questions, to demonstrate its effect I empirically examine if entry mode choice (acquisition versus greenfield) influences foreign direct investment survival. In specifications that do not account for self-selection, I find that greenfield entries have survival advantages compared to acquisitions. This confirms previous findings. However, the significance of this effect disappears once I account for self-selection of entry mode in the empirical estimates. The results confirm that estimates from models that do not account for self-selection of strategy choice can lead to incorrect or misleading conclusions. [ABSTRACT FROM AUTHOR]

Team autonomy is an essential characteristic of cross-functional teams engaged in concurrent engineering. At the same time it is a characteristic that North American firms have considerable difficulty in successfully implementing. Delegating a good deal of decision making to teams is often counteracted by processes that during a new product program withdraw some of a team's autonomy or discretion. Data from 53 cross-functional product development teams in 14 firms indicated that withdrawing autonomy is negatively correlated with both task and process aspects of team performance. The determinants of withdrawing discretion include lack of a shared understanding of the development process, environmental change, and lack of managerial "buy-in" to team autonomy. Consequently, successful implementation of team autonomy, through mitigating withdrawal of discretion, requires a clear well-communicated model of the development process, a freezing of design revisions, and policies that encourage managers to support the team rather than interfere in its decision making. [ABSTRACT FROM AUTHOR]

In this exploratory, empirical study of modernizing durable goods plants, it was found that typical measures of flexibility (e.g., number of unique parts and part families) are independent. More importantly, plants and firms with greater strategic manufacturing focus, regardless of specific emphasis (e.g., cost or quality), scheduled fewer part numbers on new flexible automation systems. This suggests that product focus and strategic focus are related in plants producing discrete parts. When flexibility is emphasized as a strategic manufacturing focus, new automation systems are significantly more likely to have shorter change-over times per part family. In general, part family-changeover time ratios appear to have the greatest potential of measures evaluated for building a useful theory of flexibility in discrete parts manufacturing. An evaluation of changes made in part types and part families during the implementation period showed that product flexibility is pursued as a way to reduce high labor costs in manufacturing. These plants accomplished this end by increasing the number of parts scheduled on new systems. Implications for strategic management of flexibility and scope are presented. [ABSTRACT FROM AUTHOR]

Choices that require multiple stakeholders to balance conflicting objectives are among today's most controversial decisions. Although many techniques exist for helping decision makers to select among projects, little attention has been given to processes for identifying improved alternatives based on clearly articulated stakeholder values. In this paper we describe a general process to inform controversial social decisions by first structuring stakeholder objectives and then using this information to create policy alternatives. We also report the results of a workshop in Sabah, Malaysia which used the proposed approach as the basis for multiple stakeholder negotiations. [ABSTRACT FROM AUTHOR]

This study examines the effect of signals from a competitor on the decisions of managers in a situation of strategic interdependence. The context is a multi-period pricing simulation and the payoffs are structured in accordance with a Prisoner's Dilemma. The signals consist of messages from the competitor and observations of the pricing decisions made by the competitor. The managers' responses to particular types of signals and particular combinations of moves and messages change over the course of the simulation. Suggestions for future research on competitive signaling are offered. [ABSTRACT FROM AUTHOR]

In this paper we consider a type of bias which stems from the mathematical algorithm often used to determine an optimal match between two groups. We compare two different solution concepts for the matching assignment problem: the traditionally stable solution vs. a multiplicative utility approach that should avoid the bias. Simulation modeling leads us to conclude that: (1) With respect to all sizes compared in our experiment, applicants and employers groups were always treated far more equally under the multiplicative utility approach than the stable approach. (2) When using the stable algorithm, the size of the bias is affected by the size of the problem (i.e., the larger the problem size is, the larger the performance discrepancy between two groups of participants). Further analyses of the sensitivity of the finding to different assumptions (e.g., correlation in the preference orderings of the two groups, or use of nonlinear conversion from ranks to utilities) also resulted in a superior performance of the multiplicative utility algorithm in terms of a more equitable outcome. [ABSTRACT FROM AUTHOR]

This paper identifies four groups among 113 Fortune 500 manufacturers that approach innovation quite differently. The groups are based on 27 measured elements of corporate environment, corporate strategy, and formal and informal organization. Both product innovation and financial performance differ significantly over the groups, and a group of 42 firms that invest heavily in innovation perform best financially. A smaller group of firms that are not innovative but which follow a strategy of acquisition perform nearly as well financially. Firms focusing research resources on process innovation perform poorly, although process research complements product research among the effective innovators. Particularly important for explaining both product innovation and financial performance of these firms are salient combinations of classic elements of good environment, good strategy and good organization--strong positions in growing markets, investment in research and development, open and creative organizational structures and supportive organizational climates. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]

The optimal boundaries for class-based AS/RS systems are determined. A solution procedure is developed which requires only a one-dimensional search procedure. It is shown that most of the potential improvement in the expected one-way travel time can be obtained when the warehouse is divided into a relatively small number of regions. Thus, there is no need to use the full-turnover approach, which is difficult to implement. [ABSTRACT FROM AUTHOR]

Given incomplete factor markets, appropriate time paths of flow variables must be chosen to build required stocks of assets. That is, critical resources are accumulated rather than acquired in "strategic factor markets" (Barney 1986). Sustainability of a firm's asset position hinges on how easily assets can be substituted or imitated. Imitability is linked to the characteristics of the asset accumulation process: time compression diseconomies, asset mass efficiencies, inter-connectedness, asset erosion and causal ambiguity. [ABSTRACT FROM AUTHOR]

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

In a study of 56 food processing firms, respondents reported on manpower flows that had an important influence on innovation decision making. Positive gain manpower flows appear to be a relatively rare occurrence. Only 23 (41%) of these 56 firms report any significant, innovation-impact, personnel additions, and 15 of these involve management positions. Four propositions were tested that focus on the relationship between manpower flows and innovative outcomes of an organization, i.e., offering new products and incorporating new processes. Moderate support was found for the proposition that net gain manpower flows are more likely to be related to radical as opposed to incremental process adoption. Evidence suggests that there is an inverted "u" shaped relationship between, net manpower flows and innovation outcomes. New blood stimulates innovation up to a point after which there is disruption to the innovation process. Adding too many people at once who all have a significant influence on the process may be unwise. The impact of manpower flows on innovative outcomes appears to be moderated by organization structure and the availability of slack resources for innovating. In particular, net manpower flows were significantly more likely to be positively correlated with the sum of the staged adoption behaviors for the retort pouch in decentralized (p < 0.05) and complex (p < 0.01) organizations. This and other evidence suggest that structural autonomy and new job titles with substantial visibility in the firm can go far to accommodate newcomers and capture the innovative benefits of their arrival. The availability of slack resources strengthens the relationship between the adoption of the retort pouch and net manpower flows although the effects were not as strong (p < 0.10) as for the structural moderators. This supports the common sense notion that newcomers who have had a significant effect on innovative decision making will see these decisions implemented in organizations that allocate resources to innovating. [ABSTRACT FROM AUTHOR]

Based on a sample of 80 firms, this paper examines the risk/return performance of related and unrelated diversified firms at the level of accounting data. The results suggest that although on the average related diversified firms outperform unrelated diversified firms, related diversification offers no guarantee of a favorable risk/return performance. (Many low performers are related diversifiers.) In fact, different diversification strategies can result in similar risk/return performance. However, a favorable risk/return performance is extremely hard to achieve with unrelated diversification. The study identifies diversified firms that have managed to simultaneously reduced risks and increase returns. The results indicate that these firms differ from other firms on some managerially useful dimensions. The differences suggest clues to guide other diversified firms to improve their risk/return performance. [ABSTRACT FROM AUTHOR]

An important task in the analysis of a behavioral simulation model is to explain clearly how the model's organizational assumptions lead to its simulated behavior. All too often, model-based arguments involve an uncomfortable "leap of logic" between equations and consequences. This paper proposes two methods of analysis, premise description and partial model testing, which provide stepping stones between model equations and their simulated consequences. Premise description examines the bounded rationality of policies or decision functions in the model, pointing out the process and cognitive limitations assumed in decisionmaking. Partial model tests expose the intended rationality of small combinations of policies, showing that policies produce "sensible" actions with respect to their premises. The application of those methods is illustrated with a simulation model of a sales organization in which sales-force productivity is prone to decline. The behavior of productivity is traced to dysfunctional interactions between objectives, overtime, and salesforce motivation. [ABSTRACT FROM AUTHOR]

When making decisions, managers like to obtain pertinent information quickly and accurately from the information systems in an organization. But, often, different answers are obtained, depending on how the information request is phrased or from which information system the information is requested. In order to correct this problem, the system analyst and data base administrator have to resolve any conflicts in defining elements, their names and their relationships before computerized information systems are designed. A syntax method, described in this paper, has been developed to handle this process. This method standardizes names and mathematical relationships of elements. These standard data elements become the input to most system analysis methods facilitating the design of computerized information systems. [ABSTRACT FROM AUTHOR]

The proportionate flowshop is a special class of flowshops in which the operation times of jobs are proportionate, e.g. because of differences in the speeds of machines. In this paper, we make use of a special property of proportionate flowshops, namely that the bottleneck in the shop is almost always the one where job operations are proportionately longer than for any other operations (the slowest machine) to demonstrate a scheduling procedure that makes scheduling decisions by focusing on the information and consequences at the bottleneck resource. This is called the Focused Approach. The scheduling objective is to minimize the total tardiness cost of jobs, where each job may have a different tardiness cost. The decision rule used in this approach is the Idle Time Rule whose development is described in this paper. The approach was tested using approximately proportionate flowshops of different sizes. The results obtained for small 3-machine problems were compared against the optimal permutation schedules obtained using Branch-and-Bound and was found to be near-optimal. For larger problems using 4- and 8-machine flowshops, the results were compared to five other scheduling methods. The focused approach performed far better than those other scheduling methods not only in minimizing tardiness cost, but also minimizing the percentage of tardy jobs and the percentage of processing time to work-in-process time. Finally, the two-product shop where the bottleneck was dynamic was studied and, using a simple strategy to track bottlenecks, the focused approach was again found to perform well compared with other heuristic methods. [ABSTRACT FROM AUTHOR]

This paper addresses the problem commonly faced by R&D managers of funding redundant R&D tasks across several stages or components of a project. In the proposed methodology it is assumed that task outcomes are random, but that their distribution can be determined from engineering inputs. In order to account for individual preferences a utility function is used to measure overall project results, and hence guide the decisions at each stage. The problem is formulated as a probabilistic network and solved by means of a heuristic comprising simulation and dynamic programming. Although computational experience is limited, the results obtained from a number of examples associated with the development of a photovoltaic solar module were quite promising; that is, the heuristic always found the optimal investment plan. In general, computational times were minimal when compared to data collection efforts, with the latter perhaps being the principal hurdle to full implementation. The sponsoring organization, however, felt that the unified approach offered by the methodology represented a major improvement over current analytic techniques. [ABSTRACT FROM AUTHOR]

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

In this paper, we consider multi-item inventory systems that contain repair kits of spare parts and tools and may include an inventory of spare machines as well. Demands occur in the form of field repair jobs, each requiring some collection of parts and tools for completion. If any required part or tool is not in the repair kit, the repair job is "broken." The penalty or inconvenience cost is assumed to be proportional to the number of broken jobs, regardless of the number of items short. Previous work on job completion based systems is summarized and new results for the optimal solutions are derived. A more general job completion based system is also analyzed, which allows a pool of spare machines to be used to satisfy demands which cannot be met with the repair kits. Techniques are presented for optimizing the trade-off between the inventory cost of repair kits plus spare machines and the overall level of service. [ABSTRACT FROM AUTHOR]

Under what conditions is decentralization of facilities rational for a client-centered system of service or administration, and when is great centralization more cost-effective? Four aspects of decentralization are identified: (1) pluralization of facilities (e.g. service points or channels); (2) dispersal in geographic space; (3) specialization by function or kind of service; and (4) adaptation to the specific requirements of each case through repeated feedback passes or negotiating queries. Different functions or kinds of service are treated as being located in a function space; the distances among them correspond to the number and cost of adjustment steps which a server or a service facility needs to shift from one function to another. For calculating the optimal number of facilities, n, the most important variables, calculated as averages, are the service load; the geographic distance; the cost of time spent in transporting a request and the response to it, and the transport speed; the functional distance or number of functions; the cost of time in adjusting to the function requested; and the adjustment speed; and the total fixed cost per facility. Other important variables are the number of negotiating queries per request, and an indicator of the value of time (i.e. of a speedier response). Under certain assumptions, such as neglecting economies or diseconomies of scale, the optimum number of facilities for a system with a single function then varies as the square root of the service load; this is also the case for a system with a single location but several functions. For a system with several functions and locations, the optimal number of facilities varies as the two-thirds power of the service load. Long-term trends may be toward decentralization when service loads and the costs of service time grow faster than capital costs and transport and adjustment speeds, as seems likely for the next several decades. Where the opposite conditions prevail, cost-effectiveness should favor centralization, such as perhaps in some earlier periods, and possibly in the more distant future. Possible applications through eventual elaborations of these oversimple models are suggested for fire, ambulance, and police, school and local government systems; hospitals and clinics; libraries, telephone exchanges, and computer systems; laboratories, repair shops, and mail order houses; law courts and judicial districts; and the numbers of administrative districts and sovereign states. [ABSTRACT FROM AUTHOR]

The article presents a commentary on 1971 guidelines by the Operations Research Society of America (ORSA) for the practice of operations research. The author offers several recommendations for clarification of the guidelines. He recommends that there be a clearer meaning of "applying the scientific spirit" as it relates to operations research and management science practices. He also recommends avoiding the word objectivity when characterising management science and operations research work. The author also questioned whether or not the implied model of behavior in the guidelines was scientifically accurate.

The article presents commentary on 1971 guidelines by the Operations Research Society of America (ORSA) for the practice of operations research. Management Science students offer their appraisal of the guidelines. They contend that the guidelines contain a number of significant flaws. The students point out that the guidelines offer a restrictive conception of operations research. They explain that the mission of operations research does not primarily involve the prediction of system behavior. The authors also criticize the report for failing to distinguish between ideals and standards for research performance.

The article discusses 1971 guidelines by the Operations Research Society of America (ORSA) for the practice of the operations research. Specifically the author discusses the language employed throughout the guidelines. The author contends that the guidelines failed to capture a careful consideration of the problems doing operations research. He explains that the report offered "normative" statements. The author says it is undesirable to for a practitioner of operations research to discriminate among the roles of citizen, advocate, and analyst.

A theorem is developed which reduces to manageable proportions a linear programming problem of potentially infinite size. A converging iterative procedure is presented for estimating the parameters to be used in combining the activities of the original large problem. The theorem and iterative procedure are applicable to the general problem of sorting material in industrial processes, whether the material to be sorted consists of peas, pine logs, or poultry products. [ABSTRACT FROM AUTHOR]