doi: 10.1287/mnsc.39.12.ipmid: N/A
In memoriam for Judith Larrivee (19471993), Technical Editor of Management Science.
doi: 10.1287/mnsc.39.12.1439pmid: N/A
Boom and bust is a pervasive dynamic for new products. Word of mouth, marketing, and learning curve effects can fuel rapid growth, often leading to overcapacity, price war, and bankruptcy. Previous experiments suggest such dysfunctional behavior can be caused by systematic “misperceptions of feedback,” where decision makers do not adequately account for critical feedbacks, time delays, and nonlinearities which condition system dynamics. However, prior studies often failed to vary the strength of these feedbacks as treatments, omitted market processes, and failed to allow for learning. A decision making task portraying new product dynamics is used to test the theory by varying the strength of key feedback processes in a simulated market. Subjects performed the task repeatedly, encouraging learning. Nevertheless, performance relative to potential is poor and is severely degraded when the feedback complexity of the environment is high, supporting the misperception of feedback hypothesis. The negative effects of feedback complexity on performance were not moderated by experience, even though average performance improved. Models of the subjects' decision making heuristics are estimated; changes over trials in estimated cue weights explain why subjects improve on average but fail to gain insight into the dynamics of the system. Though conditions for learning are excellent, experience does not appear to mitigate the misperceptions of feedback or systematic dysfunction they cause in dynamic decision making tasks. We discuss implications for educational use of simulations and games.
Morrice, Douglas J.; Schruben, Lee W.
doi: 10.1287/mnsc.39.12.1459pmid: N/A
In this paper, we provide a quantitative approach to Frequency Domain Methodology (FDM) using harmonic analysis. For a certain class of metamodels, we give the frequency domain hypothesis and develop the corresponding hypothesis test. Minimum simulation model run length information for FDM is provided for a subclass of these metamodels. We discuss factor screening designs to increase the power of the test and illustrate these designs by an example.
Johnson, M. Eric; Brandeau, Margaret L.
doi: 10.1287/mnsc.39.12.1477pmid: N/A
We consider the problem of designing a multivehicle automated guided vehicle system (AGVS) to supplement an existing nonautomated material handling system. The AGVS consists of a pool of vehicles that deliver raw components from a central storage area to workcenters throughout the factor floor. The objective is to determine which workcenters warrant automated component delivery and the number of vehicles required to service those workcenters, to maximize the benefit of the AGVS, subject to a constraint that the average waiting time for material transport in the system not exceed a predefined limit. The pool of vehicles is modeled as an M/G/c queuing system and the design model is formulated as a binary integer program with nonlinear waiting time constraints, which are expressed by approximate queueing formula. We develop two different implicit enumeration algorithms to exactly solve the analytical model. We illustrate our model with an example of an actual AGVS design problem at Hewlett-Packard, and we present computational experience for other example design problems. We show how sensitivity analysis can be used to ensure that the analytical model yields an optimal solution to the design problem.
Nandakumar, Purushottaman; Morton, Thomas E.
doi: 10.1287/mnsc.39.12.1490pmid: N/A
This paper details the application of a class of heuristics to the Fixed-life Perishability Problem formulated by Nahmias (1975a) and Fries (1975). Various assumptions for this model include i.i.d. demand, linear ordering, holding and penalty costs. Goods have a known fixed lifetime and perished goods cause a linear outdating cost to be incurred. The approach we use, that of developing heuristics from ‘near myopic’ bounds, involves viewing periodic inventory problems in the framework of the classic “newsboy” model. We exploit various properties of the problem under consideration to derive tight bounds on the newsboy parameters, thus leading to efficient bounds on the order quantities. Computational studies reveal that the heuristic policies are near optimal, and are easy to compute.
Gallego, Guillermo; Yao, David D.; Moon, Ilkyeong
doi: 10.1287/mnsc.39.12.1499pmid: N/A
We study a manufacturing process that is quite common in semiconductor wafer fabrication. In generic terms, the job to be processed consists of J units. To process the job, a “setup” is required, followed by routine processing and testing. In principle, the entirety of the job can be set up and processed in a single batch. However, the setup is prone to failure, leading to loss of units. Hence, in practice trial runs are often conducted, with each trial involving a small batch of units. Here we identify an optimal control of such processes. The policy prescribes a maximum of k* (≤J) single-unit trial runs. To establish optimality, we use the recently developed notion of stochastic convexity/concavity and related machinery.
Grabowski, Martha; Wallace, William A.
doi: 10.1287/mnsc.39.12.1506pmid: N/A
Increased maritime traffic, new types of vessels, and construction of oil and gas producing structures have made navigating in close waters more hazardous. In addition, attempts to increase shipboard productivity have resulted in fewer personnel on board the vessel. This paper reports on the development and evaluation of a prototype expert system to support the cognitive processes involved in piloting: maneuvering and collision avoidance, and the practice of good seamanship. A model was constructed and implemented in a frame- and rule-based representation. The system was assessed using gaming with novice pilots in a merchant marine training facility. The results showed significant improvement in the bridge watch team performance, but no significant improvement in vessel performance in terms of trackkeeping. The paper concludes with a discussion of the motor, perceptual, and cognitive skills needed for piloting and how they could be supported by expert system technology as part of an integrated bridge system, an operational center for navigational and supervisory tasks aboard a ship.
Clotfelter, Charles T.; Cook, Philip J.
doi: 10.1287/mnsc.39.12.1521pmid: N/A
The “gambler's fallacy” is the belief that the probability of an event is lowered when that event has recently occurred, even though the probability of the event is objectively known to be independent from one trial to the next. This paper provides evidence on the time pattern of lottery participation to see whether actual behavior is consistent with this fallacy. Using data from the Maryland daily numbers game, we find a clear and consistent tendency for the amount of money bet on a particular number to fall sharply immediately after it is drawn, and then gradually to recover to its former level over the course of several months. This pattern is consistent with the hypothesis that lottery players are in fact subject to the gambler's fallacy.
Winkler, Robert L.; Poses, Roy M.
doi: 10.1287/mnsc.39.12.1526pmid: N/A
In this paper, probabilities of survival assessed by physicians for patients admitted to an intensive care unit are studied. The probabilities from each of four types of physicians are evaluated on an overall basis and in terms of specific attributes, and the groups are compared. The physicians with the most experience and expertise perform better overall. All four groups appear to be reasonably well calibrated, and the key factor in relative overall performance is the level of discrimination provided by the probabilities. Averages of two, three, and four probabilities for each individual patient are also analyzed. As the number of the probabilities in the average increases, performance improves on average on all dimensions, although the best overall performance is exhibited by a combination of probabilities from the two physician types performing best individually. Some comparisons are made with previous work, and implications for probability assessment and combination in medicine and more generally in other areas of application are discussed. Important characteristics of the study are the fact that it was conducted on-line in a real setting, the involvement of individuals with different levels of expertise, the use of a true predictive situation with a clearly-defined event, the consideration of multiple dimensions of the quality of judgments, and the collection of multiple probabilities for each case to permit the investigation of a variety of possible combinations of probabilities.
doi: 10.1287/mnsc.39.12.1544pmid: N/A
Underlying the widely used multiple-investment-sinking fund (MISF) method for lease evaluation is the determination of a derived lease rate which is a specific rate that provides the lessor with the required yield on equity. To compute this derived lease rate, trial-and-error techniques are traditionally used. In addition to being based on trial-and-error, the employment of these techniques requires a specification of the precise time structure of the various types of cash flows involved, and this can be somewhat technically cumbersome. To overcome these shortcomings, this study presents a mathematical derivation of a formal expression for the derived lease rate. Due to the widespread use of the MISF method, it seems that the formal expression developed here can be very useful for decision makers (at both the corporate as well as the individual-investor levels) in determining the derived lease rate in practice. Another desirable property of the model is that it can be easily employed for the purpose of studying the effects of changes in the various parameters involved on the derived lease rate.
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