Knowledge that Transforms

This paper addresses the problem of why and how a seller should develop a discount pricing structure even if such a pricing structure does not alter ultimate demand. The situation modeled is most appropriate where the seller's product does not represent a major component of the buyer's final product, where the demand for the product is derived, or where the price is only one of many factors considered in making a purchase decision. A model of buyer reaction to any given pricing scheme is developed to show that there exists a unified pricing policy which motivates the buyer to increase its ordering quantity per order, thereby reducing the joint (buyer and seller) ordering and holding costs. As a result, the seller is able to reduce its costs while leaving the buyer no worse off and often better off. The model is extended to handle variable ordering and shipping costs and situations where the seller faces numerous groups of buyers, each having different ordering policies. Finally a case study is presented explicitly showing how the proposed pricing policy can be applied to the situation of a large seller selling to a number of different buyer groups.

A review of recent literature on the corporate life cycle disclosed five common stages: birth, growth, maturity, revival, and decline. Theorists predicted that each stage would manifest integral complementarities among variables of environment (“situation”), strategy, structure and decision making methods; that organizational growth and increasing environmental complexity would cause each stage to exhibit certain significant differences from all other stages along these four classes of variables; and that organizations tend to move in a linear progression through the five stages, proceeding sequentially from birth to decline. These contentions were tested by this study. A sample of 161 periods of history from 36 firms were classified into the five life cycle stages using a few attributes deemed central to each. Analyses of variance were performed on 54 variables of strategy, structure, environment and decision making style. The results seemed to support the prevalence of complementarities among variables within each stage and the predicted inter-stage differences. They did not, however, show that organizations went through the stages in the same sequence.

A risk assessment model is developed to relate adverse health effects to alternative carbon monoxide standards. The analysis requires information in the form of available data and expert judgments concerning factors such as ambient CO level, human exposure to CO, physiological responses, and dose-response relationships. Quantitative estimates, including probabilities, are obtained for selected summary measures of adverse health effects.

Models are formulated and computed to assess the risks of hazardous materials releases in train derailments in terms of: the probability of any number of fatalities in an accident, the probability of any total number of fatalities from all the accidents in a year, and the frequency of accidents which result in any given number of fatalities. These functions are evaluated using data bases and analytical methods which provide estimates of exposure levels (traffic volumes, track conditions and population densities), spill occurrence and spill size probabilities, and fatal spill impacts (the size of the lethal area in any given accident scenario). Despite the sparsity of historical data, this methodology enables us to express the potential for catastrophic occurrences in quantitative terms, to compare these numbers with estimates of other risks, and to examine the effects of selective variations in the model inputs.

In this paper, oil spills occurring near shore in semienclosed waterways are viewed as emergency events. A partial set covering model, similar to those developed for firehouse location analysis, is applied to the problem of locating oil spill response equipment. The model includes both assessments of the relative probability of occurrence and the impact after occurrence of various spill types. A multiple objective approach enables the decisionmaker to evaluate strategies without confounding the probability of occurrence with the impact of occurrence. The paper discusses how the model can be used to support the decisions of emergency response planners who must subjectively solve the problem of attaining the best overall protection with existing resources while minimizing the risk of being unprepared for politically and environmentally sensitive events. The model discussed in the paper, although employed in a resource constrained mode, can also be used in a budget-constrained mode. The model is applied to the problem of locating oil spill response equipment on Long Island Sound, and implications for public policy are discussed in this context.

A revision of the Power Approximation for computing (s, S) inventory policies is presented. The revision incorporates modifications which (1) ensure homgeneity in the units chosen to measure demand and (2) ensure the proper limiting behavior of S − s when the variance of demand is extremely small. Computational experience shows that the revision has operating characteristics that are typically within a few percent of optimal, which is nearly as accurate as the original Power Approximation.

We study a single product inventory system with nonnegative setup cost in which the demand is a continuous random variable but orders are restricted to be integer valued. Optimal policies, when there are no setup costs, have a nice form. However, we show that, when the setup costs are nonzero, optimal policies may have a very counterintuitive form without any particular structure. We obtain a bound for the increase in costs resulting from the restriction of orders to be integers and define a suboptimal policy whose performance is within that bound.

The purpose of this study was to test a model of the organizational innovation process that suggests that the strategy-structure causal sequence is differentiated by radical versus incremental innovation. That is, unique strategy and structure will be required for radical innovation, especially process adoption, while more traditional strategy and structure arrangements tend to support new product introduction and incremental process adoption. This differentiated theory is strongly supported by data from the food processing industry. Specifically, radical process and packaging adoption are significantly promoted by an aggressive technology policy and the concentration of technical specialists. Incremental process adoption and new product introduction tends to be promoted in large, complex, decentralized organizations that have market dominated growth strategies. Findings also suggest that more traditional structural arrangements might be used for radical change initiation if the general tendencies that occur in these dimensions as a result of increasing size can be delayed, briefly modified, or if the organization can be partitioned structurally for radical vs. incremental innovation. In particular, centralization of decision making appears to be necessary for radical process adoption along with the movement away from complexity toward more organizational generalists. This suggests that a greater support of top managers in the innovation process is necessary to initiate and sustain radical departures from the past for that organization.

The study focuses attention on a grouping procedure for the purpose of joint inventory replenishments from a single supplier. The grouping procedure exploits the group discounts available on the total purchase value of a group of index and the economies of scale of order placing costs. In particular it is shown that the optimal groups are formed such that the annual (dollar) usage values of the items do not decrease (may increase or stay the same), from the first to the last group. This is similar in concept to the well-known ABC classification of inventory items. The grouping problem is modeled as a “shortest-path” using the above property.

Market games constitute a class of cooperative n-person games with sidepayments in which several coalitions may form simultaneously. In order to study coalition forming behavior in such games and to test the descriptive power of four major solution concepts that yield differing prescriptions for market games, 11 pentads of students each played 6 different market games presented in characteristic function form through a computer-controlled experimental procedure. The outcomes showed strong consistencies over pentads and sharp differences among games. None of the models fully accounted for these data. Instead, considerations of sequential formation of coalitions within a coalition structure, the concept of maximal share structure suggested in the equal share solution, and a recently developed model, that encompasses the predictions of the bargaining set and equal shares, served jointly as the first-order determinants of both the decision of which coalition to form and the allocation of payoff to coalition members.