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The article focuses on the oligopsonistic structure of the raw materials especially the pulpwood and paper industry markets of the U.S. Such markets create cost curves with configurations that differ in important ways from the usual U-shaped pattern. A model incorporating the characteristics of both resource bases in these industries is essential to an understanding of what otherwise would seem to be irrational behavior. Their behavior may be irrational in terms of short-run and long-run models of the firm. However, there is less consistency than there appears to be at first glance. Moreover, most of the inconsistency is due to the inadequacy of current accounting practice to take cognizance of the difference in marginal costs in the different input markets. The oligopsonistic buyers are aware that any increase in price for a raw material like pulpwood is partially transferred to stumpage and land values and that these prices are sticky in subsequent periods of lower demand. Higher pulpwood prices increase not only the value of land containing marketable pulpwood but the rural wage expected in pulpwood cutting and other related occupations.

This paper presents a case study of the introduction of financial incentive schemes in a fine paper mill. The circumstances were difficult in several respects. First, a new machine had been installed which raised the mill's capacity sixfold, yet the industry suffered several severe recessions in the following years. Secondly, one of the biggest British firms of management consultants had been brought in, but the employees had formally refused to have anything to do with their proposals. Thirdly, it was necessary to make special provision to reward quality as well as quantity of output. In these conditions it is significant that the measures adopted were outstandingly successful, the mill's output rising to the new capacity with a total wage-bill which, after correcting for the effect of national awards, is virtually unchanged. There has been a papermill at Wolvercote, near Oxford, for three hundred years. For the last hundred years it has been owned by the Oxford University Press and it has supplied the Press with its various qualities of bible and book papers. For most of this time there was one small paper machine running slowly and producing very expensive paper. By 1949 it had become essential to reduce production costs, and a programme of modernization was started. The existing paper machine was first modified and speeded up; then in 1957 a new paper machine 130" wide, with a designed speed of 800 ft. per minute, was brought into operation. This meant increasing annual output from 3,000 tons to a possible 18,000 tons of which only 2,500 tons was to be taken by the parent organization. At the time when the plans for the new machine were being made, it appeared that there would be no difficulty in selling this difference of 15,500 tons to other customers. In the... [ABSTRACT FROM AUTHOR]

Many situations occur in industrial systems, where decisions have to be made from time to time about the manner in which the system shall be operated. This paper concerns a class of situations in which, because of rising costs of operation per unit time, it is necessary to decide when to overhaul the system to minimize long run operating costs. The operating costs are assumed to be a quadratic function of operating time whose parameters are stochastic variables, which is the case with some electrolytic processes. The main purpose is to show how the Dynamic Programming approach can be usefully applied to such systems. [ABSTRACT FROM AUTHOR]

The article presents various abstracts in marketing focused on advertising, including "Advertising Agency Costs and Operations," by Ira Rubel and Norman Fields; "The Why and How of Business Paper Advertising," by Stephen Goerl; and "United States Department of Commerce: Office of Domestic Commerce."

The article informs that the deliveries are now being made of a new card Reader Model 3 which is intended to meet requirements of portability, limited space and low initial cost. The design requires neither motor nor blower and can be used interchangeably with AC or DC current. It is priced at $162.50 f.o.b. La Crosse, Wisconsin and immediate delivery can be made.

The article presents authors' comments on three different papers on industrial cost analysis by economists Lester G. Telser, Richard H. Holton, Frederick V. Waugh and Kenneth E. Ogren. The article says that Telser's paper is provocative, and his proposition that an inverse relationship exists between the intensity with which a firm advertises and the price elasticity of its product seems to accord with empirical observation. In addition to one's own illustrations, one may note that aggregate advertising tends to increase during periods of rising personal incomes, and vice versa. At the same time there are reasons for believing that price elasticities tend generally to decrease during such periods, and vice versa. It appears, therefore, that consumer advertising in the aggregate also conforms to Telser's thesis. The article adds that the paper by Waugh and Ogren and the paper by Holton are of an entirely different nature. Both papers utilize a static, equilibrium type of conceptual framework that derived historically from the classical theory of the stationary state. Within such a framework, analysis necessarily is made in terms of demand-supply relationships, with demand originating in the preferences and purchasing power of consumers and supply originating in production costs. In it, both demand and supply are regarded as given, and frictions tend to be regarded as interferences with pure competition.

The article discusses the abstracts of several papers on economics published in the 1965 issue of the journal "Kyklos." The first paper of the journal "On the Interpretation of the Just Price," by Samuel Hollander, argues that the just price is related to production costs within the medieval context of social status. The second paper of the journal is "Today's Circumstances and Yesterdays Theories: Malthus on Services," by J.J. Spengler. The third paper of the journal "Sources of Variation in the Capital-Output Ratio in the United States Private Business Sector, 1909-1959," by John E. La Tourette, examines the source of variation in the capital coefficient for the United States private business sector during the 1909-1959 periods. In the paper "Theme and Variations--Remarks on the Kaldorian Distribution Formula," by K.W. Rothschild, the author opines that the Keynesian distribution formula is very useful when considered as a tautological formulation of the coherence between investment, saving and income as circulatory components.

The article discusses the evaluation of the market potential of a product. The author believes the costs and marketing strategy of a product should begin during the creation of the product. He believes that by lowering the costs required to produce a product, it will increase the sales potential. The case of the plastic radio produced by General Electric is discussed as an example. The author says redesigning of products should take place to overcome customer objections, increase distinctiveness in appearance, lower manufacturing costs, and secure efficiency. These suggestions require a great deal of market, consumer, and material research. The author believes that by investing more in research, a product will yield better sales and thus, be more cost effective.

A conference paper about the economic effects of advertising is presented. The author discusses the way in which advertising effects the demand for products and services. Also discussed are its effects upon both marketing and production costs. The effects of advertising on prices and product quality are presented.

A conference paper pertaining to trends in marketing efficiency research at the time of publication is presented. The author defines efficiency in terms of marketing as the provision of maximum satisfaction to consumers per unit of economic resources. Also noted is the study "Does Distribution Cost Too Much?" by P.W. Stewart and J.F. Dewhurst.

Selective assembly is used whenever the tolerances which have to be allowed for the components are so large that the natural build up with random assembly will not satisfy functional requirements. The traditional method divides the more variable components into a number of zones of equal width and then specifies what combinations of grades may be assembled so as to produce sufficient uniformity in the final product. Theoretically there is no limit to the number of grades which can be used, but there is a serious organisational problem of having only the specified categories available at one time, and another control problem to ensure that components are correctly graded. Further, a large proportion of components may not be usable through mismatching of quantities and this can increase costs considerably. These difficulties can be reduced by suitable quality control schemes which are additional to the grading operation. The method proposed in this paper is that components should be balanced by quantities rather than by size. It depends upon knowledge of all process capabilities and requires a quality control scheme to ensure that the mean size produced for every component coincides with the objective mean. The grading operation itself gives rise to a simple quality control scheme which is based on the balancing quantities. The same scheme is applicable to all components. Mismatching is impossible as long as control is maintained and all components are used in a reasonable period of time. It is shown that many applications can be made with only three grades and that even extreme sized components can be used. Methods are given to compute the variation which will be obtained from product to product when selective assembly is only applied to some types of component and the remainder are assembled at random. Thus, it is possible to design a procedure which will give sufficient uniformity at minimum cost and avoid the complexity of excessive numbers of categories. Err... [ABSTRACT FROM AUTHOR]

The purpose of this paper is to illustrate an application of linear programming to the problem of allocation of aircraft to routes in order to maximize expected profits when there is uncertain customer demand. The approach is intuitive; the theoretical basis of this work is found in an earlier study. The allocations are compared with those obtained under the usual procedure of assuming a fixed demand equal to the expected value. The computational procedure is similar to the fixed demand case, with only slightly more computational effort required. This paper is intended both for readers interested in routing (and analogous resource allocation) problems and for those interested in studying an example of an application of linear programming under uncertainty. [ABSTRACT FROM AUTHOR]

In this paper a proof of Herbert Scarf's on the optimality of (S,s) policies in inventory theory is extended to cases where differentiability of cost functions may not be available. In addition to an ordering cost composed of a unit cost plus a reorder cost all that is needed in the proof is that the expected holding and shortage cost function be convex. [ABSTRACT FROM AUTHOR]

The purpose of the paper is to draw attention to one of the sharpest expressions of the cleavage of attitudes between economists and businessmen, and to advance some tentative suggestions for improvements in both analysis and application. This relates to the use by business of a method of cost-volume-profit analysis, and of pricing and volume adjustments, which is referred to as break-even analysis and which, prima fade, ignores the economists' generalized theorems of cost and revenue behavior. The arguments which the paper has developed, however, set a program of research and development by the cost accountant, and suggest that economists now give their attention to examining the shape and stability of aggregate revenue and cost functions over time and over output ranges, applying their resources of statistical analysis to the reconstruction of empirical microfunctions and variables. For the financial manager in industry, the lesson of the analysis is that he cannot rely with the same degree of confidence on the more naive forms of his break-even charts.

This paper seeks here a minimum cost production plan over a finite number of time periods. There is a known demand requirement (stated in production hours) to be met in each period from current and previous hours of production (stored as inventory). A production policy consists of scheduled amounts of hours, some of which are costed at regular-time wage rates, the remainder costed at overtime rates. Expansion or contraction of the work force (stated in production hours) is charged against the period-to-period variations in regular-time employment. The fluctuations in overtime production do not incur such hiring and firing costs. The amount of overtime used, however, is constrained not to exceed a specified fraction of regular-time utilized in any period. We describe algorithms for finding an optimal policy under the assumption that all costs are described by linear functions and where demands are either monotonic increasing or decreasing in time. In addition to presenting the algorithms, we also examine certain planning horizon results implied by these algorithms. Specifically, we ascertain when optimal first period decisions can be made without knowing the precise values of all future demands and costs. [ABSTRACT FROM AUTHOR]

This article proposes a forecasting model for estimating the effects of cost increases in polluting industries on the economy of the U.S. The economic effects of pollution cost control is quite small except for the changes in the net foreign balance. The net foreign balance would continue to decline substantially unless pollution were taxed at the border. The relative differences between the direct, intermediate, and final changes are substantial among the various industries. On the other hand, the secondary price effects for paper and electric power are almost negligible. The most unusual case occurs in the cement industry, where the final price is smaller than the intermediate increase. This occurs because of the high price elasticity for new housing; higher prices in general lead to less housing, which reduces the demand for cement, hence, lowering its price. The relative changes in prices and output for each of the fifteen industry were also compared. As expected, food, paper, petroleum and electric power have relatively low price elasticities, while the results are substantially higher for cement, steel, nonferrous metals and automobiles. It should be mentioned that these implicit price elasticities reflect the demand curves for the final demand products as well as the intermediate goods themselves.

This paper will present a model of equipment replacement in a stochastic environment utilizing a number of the component characteristics of an operations research orientation while being designed to emphasize the role of a stochastic representation of technological change and/or maintenance costs and the implications these have for the decision about replacement of equipment. The "replacement" referred to here is replacement of a machine in its entirety rather than the usual periodic-review-replacement-of-individual-pieces analysis to which the term "replacement" frequently refers in operations research literature. The paper outlines the approaches to equipment replacement in the literature of economics and the well-known Terborgh model and then introduces a stochastic model for studying certain aspects of equipment replacement together with the form of its analytic solution. A comparison of the cost implications of the Terborgh and stochastic model is presented for a specific example utilizing motor vehicle data. In addition, a general analytic comparison of the two replacement rules is provided. [ABSTRACT FROM AUTHOR]

This paper analyzes the problem of balancing resource capacity utilization against the costs of user delay or inventory investment. Instead of formulating algorithms to solve more classical versions of the problem, this paper describes ways that organizations can drop the cost curve prior to applying an optimizing algorithm. This is done by classifying the techniques and giving examples from organizations which have faced serious smoothing problems. Other organizations can improve their coat performance by adopting some of these techniques. [ABSTRACT FROM AUTHOR]

This paper considers an N period production planning problem in which a sequence of known demands d[sub 1], d[sub 2], ···, d[sub N] must be satisfied. The cost of production in period t consists of a setup cost K[sub i] plus a marginal cost per unit c[sub t]. The cost of carrying a unit of inventory into period t is h[sup t-1]. An optimal policy is a production plan that satisfies demand st minimum cost. The main results of the paper are a theorem that decreases the computational effort required to find optimal policies and a theorem that establishes the existence of planning horizons. The results of these two theorems are combined in a forward algorithm for the efficient solution of the problem. [ABSTRACT FROM AUTHOR]

The problem considered in this paper deals with the optimal policies for keeping cash in anticipation of future net expenses. It is an inventory problem in which the inventory level can either decrease or increase, and the decision maker is allowed to change the inventory level in any direction at the beginning of each period. In addition to the usual holding and shortage costs, the problem involves fixed and proportional costs for deciding to change the inventory level. This paper shows the form of the optimal policy if the expected holding and shortage cost is convex and if deciding either to increase or to decrease the inventory level does not involve a fixed cost. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to study the effects of errors in the sales forecast on inventory changes and production rates. This is done by computing the ratio of the standard deviation of inventory change or production rate to the standard deviation of sales rate. By use of this ratio the effects of the average forecast error, the variance of the forecast error, and the serial correlation of sales can be studied. Both analytical method and simulation procedures are used. [ABSTRACT FROM AUTHOR]

The paper evaluates and compares classes of multi-item inventory problems where joint order of several items may save a part of the setup cost. A cost ratio and simple decision rule are determined for joint versus individual orders in specified cases. The comparisons call for the necessity of a new policy for reorder point-triggered random output multi-item systems. This policy, "the random joint order policy," operates through the determination of a reorder range within which several items can be ordered. The existence of an optimum reorder range is proved, and a computational technique is demonstrated with the help of a machine-interference type queueing model. Under favorable conditions the results exhibited on the diagram of optimum reorder ranges are generally applicable. The random joint order policy model is especially suitable for computer controlled inventory systems. [ABSTRACT FROM AUTHOR]

In a system with several stochastically failing parts and economies of scale in their maintenance, it may be advantageous to follow an "opportunistic" policy for maintenance. In opportunistic policies the action to be taken on a given part at a given time depends on the state of the other parts of the system. For the model considered in this paper, it is assumed that all parts of the system but one are inspected continuously (monitored) and that the remaining part cannot be inspected except when it is replaced. If the monitored parts have exponential distributions of time to failure, the optimal replacement policy for the remaining part has the following form: Let the non-monitored part be labeled 0 and let there be M monitored parts, labeled 1, … , M; then there are M + 1 numbers n1, …, nM , N, with 0 ≦ ni ≦ N ≦ ∞ such that: (a) if Part i fails at a time when the age of Part 0 is between 0 and ni, replace Part i alone (i = 1, …, M); (b) if Part i fails at a time when the age of Part 0 is between ni and N, then replace Parts 0 and i together; (c) if Part 0 reaches age N at a time when all monitored parts are good, replace Part 0 alone. It is demonstrated that the parameter N is finite provided that the reliability of the non-monitored part approaches zero as the age of this part goes to infinity. These results are proved for several alternative criteria for evaluating replacement policies. Computation of the parameters of the optimal policy is also discussed. Applications of this policy are discussed in [2]. [ABSTRACT FROM AUTHOR]

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

The impact of order on the overall cost of a product manufactured by independent serial processes is well known. Process improvement and subsequent cost reduction is always an objective. Constrained financial resources are usually the case. This paper combines these three aspects to give direction to the use of financial resources to optimize the cost reductions in a serial process. In the paper it is shown that a non-optimal sequence may have the most potential when the resources are properly applied. [ABSTRACT FROM AUTHOR]

The article discusses the marketing of newspapers. According to the author, publishers of newspapers sell their products in a mass market at a reduced price that does not cover the costs of production. Publishers depend on advertising to cover production costs and to make a profit. The author notes that cyclical patterns in both the advertising and circulation of newspapers can be observed between World War I and World War II. Also discussed is the effect of other media, including television and picture magazines, on newspaper circulation.

A conference paper pertaining to the effects of the United States national defense program at the time of publication on industrial marketing is presented. According to the author, national defense program is stimulating a powerful sellers market. The author notes some effects of industrial mobilization on the machine tools industry.

The paper reports on two empirical studies into the relationship between a company's sales and its inventories. Two ideas are examined. Firstly, are there economies of scale in the holding of inventories, do large companies hold proportionately lower levels than smaller companies? Secondly, has there been a significant change in the inventory--sales relationship over time, has the increasing emphasis on scientific management led to a change in inventory holding practices?
As well as answering these two points, the paper illustrates the difficulties of working with aggregate company data, supplied only once a year. The main statistical technique used is regression analysis. [ABSTRACT FROM AUTHOR]

The article presents summary of articles present at a round table conference on cost functions and their relation to imperfect competition. J.M. Clark, in his paper, expressed that, where one of the conditions of perfect competition is absent (as is always the case) the presence of others may lead to greater rather than less imperfection. Potential competition remains an important factor. So far as imperfect competition is governed by long-run curves of individual demand and cost, these are flatter than commonly represented and the imperfection of competition correspondingly less. As to short-run problem; industry with fluctuating demand requires prices in excess of short-run marginal cost, though still limited by competition. Favorable conditions appear to include a sloping individual-demand curve and some uncertainty whether a reduction of price will be quickly met. Joel Dean's paper presented provisional findings of an investigation designed to determine empirically the patterns of short-run and long run cost behavior of individual enterprises in a variety of industries. Six case studies of short-run cost were summarized.

This article focuses on economies of scale. The author was not aware that his paper had left a "predominantly negative impression" on the uses of the power rule. That rule is a crude one and can be refined in various ways. In the last part of the author's paper he specifically suggested some ways of breaking down the plant into homogeneous process areas and studying scale effects at that level. The author is in fact bullish on what might be found in that way. The author has a suspicion that normally one underestimates the extent of economies of scale because the typical study is concerned with a plant at a certain stage in production and overlooks many of the possibilities of economies through vertical integration of stages. Second, the author suspects that the data used are often biased because the capital equipment in many industries in the U.S. are aged (e.g., in nonferrous metals) and one does not study the economies associated with newer techniques. The study of the water-pumping plant is especially interesting.

This paper explores the relationship between the decision to purchase a costly information system and the wealth of an investor with a logarithmic utility function, where the information system may provide information concerning the payoffs from risky investments. It is shown, for the logarithmic investor, that (a) there is a wealth "break-even point" below which it is suboptimal to purchase an information system at a fixed cost, and (b) the amount the investor would be willing to pay for access to the information system is a linearly increasing function of his wealth. [ABSTRACT FROM AUTHOR]

We present here a model of induced invention, based on an interpretation of Kennedy's invention possibility hypothesis. In this model technical progress is factor augmenting. The invention possibility frontier indicates the maximum rate of labour augmentation corresponding to a given rate of capital augmentation. Production and distribution at any moment of time are governed by the customary neoclassical principles. We then investigate, under certain postulated saving behaviour, the existence, uniqueness and stability of a growth equilibrium (not necessarily a golden age) in which factor shares are constant. A brief summary of the principal findings and some suggestions for improving the model conclude the paper. [ABSTRACT FROM AUTHOR]

This paper examines pure stationary policies for starting and stopping service in a single-server queue with respect to the state space consisting of queue length and whether or not the service facility is operating. Almost any such policy is shown to be equivalent to one that depends on two parameters. For a wide class of coot functions, the 'almost any' is shown to be without loss of optiniality in the sense of average cost per unit time over an infinite horizon. The results are largely distribution-free and are obtained with random-walk arguments. They apply also to certain repair problems and to production smoothing problems in which demand is a renewal process and goods are made sequentially. [ABSTRACT FROM AUTHOR]

In most inventory models one of the costs considered is shortage cost. However, this cost is often very hard to measure. For the models considered in this paper, instead of introducing a shortage cost, we define a stock-out penalty function and impose a constraint on it. For example, a constraint on the probability of stock-out can be viewed this way. We exhibit the general, randomized, optimal policy and give graphical and numerical methods of calculating it. We also discuss how our stock-out penalty function is related to shortage cost. [ABSTRACT FROM AUTHOR]