Knowledge that Transforms

Social preferences for equity in the distribution of net benefits are not represented in a cost-benefit study by the sum of the individuals’ net present values. This paper presents two different decision analysts models for representing such an equity issue. For each model, conditions on the tradeoffs between different individuals are shown to imply that preferences can be represented by a special type of group value function. Procedures are presented by which such a group value function can be determined and used as part of a public policy evaluation.

We consider stochastic models for flow shops, job shops and open shops in which the work required by job j is the same at each machine, being a random variable W j . Because machines operate at different speeds, S i , the processing time of job j at machine i is W j /S i ,. It is the main result of this note that in a flow shop where the machine speeds increase (decrease) from the first to last machine and the workload distributions are ordered by a likelihood ratio criterion, then the makespan of the jobs is stochastically minimized by processing the jobs in the order of least to greatest (greatest to least) workload.

In this paper we consider a class of job shops with a dispatch area and a machine shop, where operational controls are exercised at the dispatch area as well as at the machine shop. For such dynamic job shops with these two levels of control, there are three categories of models. They are (1) pseudo-static, (2) pure dynamic, and (3) pseudo-dynamic. In this paper approximate queueing models are developed for pure dynamic and pseudo-dynamic job shops; open queueing network models and controlled arrival single stage queueing models, respectively. The accuracy of the open queueing network models and their use are illustrated. An example indicative of the possible accuracy of the controlled arrival single stage queueing models is also given.

Applying a relatively decentralised system of control which would keep state-owned enterprises (SOE) at arm's length from ministerial departments has been a stated policy for many governments around the world. However, the specific controls typically used for implementing this policy have seldom been successful. The purpose of this paper is to review and evaluate certain of these controls, drawing upon the British system of arm's length control of nationalised industries. In order to delimit the problem the paper cuts across the government-SOE relationship from the perspective of investment planning. Using primary information from the capital investment process in a particular nationalised industry, the paper searches for evidence on whether and in what ways existing controls have not been successful. Three types of controls are investigated: (1) The economic and financial groundrules, which are supposed to simulate a competitive, business-style efficiency. These rules are often assumed to act as an “invisible hand,” limiting direct government control. (2) The direct investment review, in the framework of the wider public sector expenditure survey. In discussing the nature of this review the paper examines whether government approval of investment conforms to an incrementalist or “muddling through” model. It further considers the role for incremental methods in controlling SOE investment. (3) The attempt to use corporate planning as a control instrument. Evidence from internal control processes within the enterprise and in particular the review of investment by a Central Executive is used in order to evaluate the above controls. This serves to show the diffuse character of the planning process and the possibilities and limitations of using similar controls at the government level. Suggestions are put forward for strengthening these forms of control by modifying or reinforcing certain elements within the existing arm's length framework. The paper would be useful for evaulating the difficulties involved in establishing some form of orderlines and formalisation in government-SOE relationships. It shows some of the weaknesses associated with certain “technocratic” rules and solutions to public policy problems in this environment.

We examine the firm's optimal advertising behavior under conditions of uncertainty. For the static one-period model, we show that the firm's attitude toward risk may be responsible for the potential divergence between advertising decisions under uncertainty and those under deterministic conditions. For the dynamic multi-period model, the ultimate impact of uncertainty on advertising is further complicated when the sales response function contains an unknown parameter, and the firm wishes to gain more information about it through experimentation. We demonstrate that whether it is optimal for the firm to experiment at an advertising rate higher, equal to, or lower than the myopic (one-period) level would depend on the specification of the response function. Finally, we offer some empirical evidence for our assumption of a quadratic sales response function, using time-series data of twelve major brands of cigarettes.

This paper considers the periodic review inventory problem for which one or more parameters of the demand distribution are unknown with a known prior distribution chosen from the natural conjugate family. The Bayesian formulation of this problem results in a dynamic program with a multi-dimensional state space. Two models are analysed: the depletive inventory model of consumable items and the nondepletive model of reparable items. For both models and for some specific demand distributions, it is shown that the solution of the Bayesian model can be reduced to that of solving another dynamic program with a one-dimensional state space. Moreover, an explicit form for the optimal Bayesian ordering policy is given in each case.

In a previous paper (Management Science, December 1981) Hausch, Ziemba and Rubinstein (HZR) developed a system that demonstrated the existence of a weak market inefficiency in racetrack place and show betting pools. The system appeared to make possible substantial positive profits. To make the system operational, given the limited time available for placing bets, an approximate regression scheme was developed for the Exhibition Park Racetrack in Vancouver for initial betting wealth between $2500 and $7500 and a track take of 17.1%. This paper: (1) extends this scheme to virtually any track and initial wealth level; (2) develops a modified system for multiple horse entries; (3) allows for multiple bets; (4) analyzes the effects of the track take and breakage on profits; (5) presents recent results using this system; and (6) considers the extent of the inefficiency, i.e., how much can be bet before the market becomes efficient?

Recently Kornbluth and Steuer have developed a simplex-based algorithm for finding all weakly-efficient vertices of an augmented feasible region of a multiple objective linear fractional programming problem. As part of this algorithm, they presented a method for detecting certain weakly-efficient vertices called break points. In this note we show that the procedure used by Kornbluth and Steuer in this method for computing the numbers needed to find these break points may sometimes fail. We also propose a fail-safe method for computing these numbers and give some computational results with this method.

The profitability of a new technology is rarely known with certainty at its announcement date. Consequently, prior to making an adoption decision it behooves the firm considering the adoption of this innovation to reduce the level of uncertainty associated with its profitability. The firm accomplishes this by sequentially gathering information, updating its prior estimate of profitability in a Bayesian manner. Quantifying the uncertainty regarding the innovation permits application of dynamic programming techniques: criteria are derived which tell the firm when to stop collecting information and make the adoption decision. It will be shown that it is optimal for the firm to continue to collect information until its estimate of profitability crosses one of two thresholds: upon crossing the upper threshold the firm adopts the technology, whereas the firm rejects the technology if the lower threshold is crossed. The model predicts that even the manager who behaves optimally will occasionally adopt unprofitable technologies and reject profitable ones.

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.