An investigation of due-date assignment rules with constrained tightness

We describe an experimental study of a single-machine scheduling model for a system that assigns due-dates to arriving jobs. The average lightness of the due-dates is assumed to be governed by a policy constraint, which we link analytically to the parameters of the decision rules for due-date assignment. We examine the use of different kinds of information in setting due-dates, and we investigate the relationship between the due-date assignment rule and the priority dispatching rule. On the basis of our results we identify situations in which the dispatching rule is critical to effective scheduling, others in which the due-date assignment rule is critical, and still others in which the combination of the two rules is a critical design issue.     

The effects of input control in a simple scheduling model

Input control is a generic procedure for smoothing production workload by delaying work during intervals of heavy load. While input control techniques have several practical benefits, they also have an inherent disadvantage. By restricting the set of jobs available for scheduling, an input control procedure removes some of the scheduling options that would otherwise be available. This paper examines the impact of such a procedure in a simple simulation model.The simulation model represents a production shop in a simplified way, as a single machine, but the production control system has three distinct parts. The first part assigns due-dates to customer orders, taking into consideration the size of each job and the workload in the shop. The second part is a job releasing rule that implements input control. The third part is a priority dispatching procedure that is aimed at meeting due-dates. By representing this three-part control system the model provides an opportunity to explore the interdependence between input control and other control procedures.Reinforcing previous research, the simulation experiments confirm that modified due-date priorities perform more effectively than other basic priority rules when performance is measured by average tardiness. Moreover, the experiments indicate that performance under the modified due-date regime is never improved by the use of input control. On the other hand, with dispatching rules that rely on shortest-first or critical ratio priorities, the experiments indicate that input control is sometimes advantageous. The effects of input control on scheduling performance thus appear to be somewhat complicated, and further experiments were designed to explore some of the relationships involved. The principal finding, however, provides a warning that input control can be counterproductive.     

A model of intersectoral flow of technology using technology and innovation flow matrices

This paper builds a simple general equilibrium model that sheds new light on the mechanism of intersectoral flows of technology. It explicitly models the production of technology using diverse technology components as inputs. The model shows that demand shocks do not cause innovation while technology shocks as deviations from a balanced growth path induce asymmetric productivity changes across sectors. We also conduct a simple quantitative analysis using recent Japanese R&D data, which shows that most productivity effects remain within the bounds of the sector. We find some important exceptions to this rule, however, in particular for shocks occurring in information technology and precision instruments.     

Existence of marginal pricing equilibria in economies with externalities and non-convexities

We consider a general equilibrium model with externalities and non-convexities in production. The consumption sets, the preferences of the consumers and the production possibilities are represented by set-valued mappings to take into account possibility of external effects. There is no convexity assumption on the correspondences of production. We propose a definition of the marginal pricing rule, which generalizes the one used in the model without externality and, which satisfies a continuity assumption with respect to the external effect.We prove the existence of general equilibria under assumptions which allow us to encompass together the works on economies with externalities and convex conditional production sets, and those on marginal pricing equilibria in economies without externalities. We provide examples to illustrate the definition of the marginal pricing rule and to show the difference with the standard case.     

A simple and effective scanning rule for a multi-channel system

We consider a multi-channel system in which one apparatus makes a sequence of observations, one at a time. By means of scanning, i.e. selecting a channel to be analyzed at any instant and deciding to stop at some stage, it is required to determine the channel in which there is the signal with prescribed constraints on error probabilities. A simple scanning rule, based on a cyclic application of a sequential probability ratio test (SPRT) is proposed for this problem. It is proved that in the case of Brownian motion, the expected scanning time of this rule is equal to the one of the optimal scanning rule (which is known only for this case). The simple structure of this rule permits to obtain corrected Brownian approximations for its characteristics in the case of exponential family of distributions. The same procedure is used in multi-channel change point problem.     

A note on stopping rules for rolling production scheduling

Instead of solving fixed horizon production scheduling problems with specified terminal inventory conditions, we use forecasting to extend the problem horizon until stopping rule conditions are met. Major questions for this procedure relate to how to provide data for the extended problem and when to stop the process. We provide extensive computational results indicating that relatively simple methods perform quite well.     

Idiot's Bayes—Not So Stupid After All?

Folklore has it that a very simple supervised classification rule, based on the typically false assumption that the predictor variables are independent, can be highly effective, and often more effective than sophisticated rules. We examine the evidence for this, both empirical, as observed in real data applications, and theoretical, summarising explanations for why this simple rule might be effective.     

On the natural selection rule in general linear models

We consider a problem of selecting the best treatment in a general linear model. We look at the properties of the natural selection rule. It is shown that the natural selection rule is minimax under to “0–1” loss function and it is a Bayes rule under a monotone permutation invariant loss function with respect to a permutation invariant prior for every variance balanced design. Some other condition on the design matrix is given so that a Bayes rule with respect to a normal prior will be of simple structure.     

Linear learning in changing environments

The decision maker receives signals imperfectly correlated with an unobservable state variable and must take actions whose payoffs depend on the state. The state randomly changes over time. In this environment, we examine the performance of simple linear updating rules relative to Bayesian learning. We show that a range of parameters exists for which linear learning results in exactly the same decisions as Bayesian learning, although not in the same beliefs. Outside this parameter range, we use simulations to demonstrate that the consumption level attainable under the optimal linear rule is virtually indistinguishable from the one attainable under Bayes’ rule, although the respective decisions will not always be identical. These results suggest that simple rules of thumb can have an advantage over Bayesian updating when more complex calculations are more costly to perform than less complex ones. We demonstrate the implications of such an advantage in an evolutionary model where agents “learn to learn.”     

Values Do Follow a Simple Rule!

Contrary to what is often suggested, values do follow a very simple rule as the rate of profit r varies, provided only that the system is square. None of single production, semi-positive vertically integrated input coefficients, or regularity à la Schefold needs to be assumed. Furthermore, that very simple rule is followed for all finite values of r and can be expressed solely in terms of the powers of r. Moreover, when the requisite numéraire is employed, the wage

profit frontier takes a simple form; conversely, when the frontier takes that form, one knows that the requisite numéraire is being used, even without knowing what it is.     

A billing policy for credit customers

Firms frequently bill customers on a fixed-period basis (such as once a month), or on a fixed-amount basis (whenever the outstanding credit balance reaches a particular amount). We examine here a more flexible procedure, the bill-or-carry policy, which uses a simple decision rule and results in lower costs than either the fixed-period or fixed-amount procedures. The logic and properties of the bill-or-carry policy are compared with those of the fixed-period and fixed-amount procedures.     

A free-rider problem with a free-riding principal

In a moral hazard problem caused purely by joint production and not by uncertainty, we examine the problem faced by a principal who actively participates in production along with a group of agents. We show that, when designing the optimal output sharing rule, the principal need not look for anything more complicated than the frequently observed simple linear or piecewise linear rules. We also confirm the presence of a friction between the principal’s residual claimant role and her incentive to free-ride in the production process that prohibits her from completely mitigating the moral hazard problem. This paper is from the first chapter of my Ph.D. dissertation at The University of British Columbia, Canada, 1993. I would like to thank my thesis supervisor John Weymark for his many helpful comments and suggestions. I have also benefitted from the comments of Charles Blackorby, David Donaldson, Mukesh Eswaran, Kenneth Hendricks, Ashok Kotwal and Guofu Tan. An anonymous referee and an associate editor provided helpful suggestion. I am also grateful for the hospitality of the Indian Statistical Institute, Delhi Centre, and the Centre for Development Economics, Delhi School of Economics, where parts of the paper were revised while I was a visitor. I am solely responsible for any remaining errors and omissions.     

Macroeconomic and financial stability in a monetary union: The case of Lithuania

In this paper, we study the implications of macroprudential policies in a monetary union for macroeconomic and financial stability. For this purpose, we develop a two-country monetary union new Keynesian general equilibrium model with housing and collateral constraints, to be calibrated for Lithuania and the rest of the euro area. We consider two different scenarios for macroprudential policies: one in which the ECB extends its goals to also include financial stability and a second one in which a national macroprudential authority uses the loan-to-value ratio (LTV) as an instrument. The results show that both rules are effective in making the financial system more stable in both countries, and especially in Lithuania. This is because the financial sector in this country is more sensitive to shocks. We find that an extended Taylor rule is indeed effective in reducing the volatility of credit, but comes with a cost in terms of higher inflation volatility. The simple LTV rule, on the other hand, does not compromise the objective of monetary policy. This reinforces the “Tinbergen principle”, which argues that there should be two different instruments when there are two different policy goals.     

Robust optimal monetary policy in a forward‐looking model with parameter and shock uncertainty

This paper characterizes a robust optimal policy rule in a simple forward‐looking model, when the policymaker faces uncertainty about model parameters and shock processes. We show that the robust optimal policy rule is likely to involve a stronger response of the interest rate to fluctuations in inflation and the output gap than is the case in the absence of uncertainty. Thus parameter uncertainty alone does not necessarily justify a small response of monetary policy to perturbations. However, uncertainty may amplify the degree of ‘super‐inertia’ required by optimal monetary policy. We finally discuss the sensitivity of the results to alternative assumptions. Copyright © 2007 John Wiley & Sons, Ltd.     

Nonparametric search

We analyze the search problem of a consumer who derives information only from the sequential search process. This paper considers the case of a consumer who uses a nonparametric procedure to estimate the probability distribution. It is shown that a solution to the consumer's problem is a very simple strategy which depends only on the order statistics, on the discounting factor, and on the duration of the search. It leads to a finite search almost surely. This optimal strategy is a myopic rule which is computable and which is characterized by a sequence of strictly increasing reservation prices.     

Model uncertainty and policy evaluation: Some theory and empirics

This paper explores ways to integrate model uncertainty into policy evaluation. We describe a general framework that includes both model averaging methods as well as some measures that describe whether policies and their consequences are model dependent. These general ideas are then applied to assess simple monetary policy rules for some standard New Keynesian specifications. We conclude that the original Taylor rule has good robustness properties, but may reasonably be challenged in overall quality with respect to stabilization by alternative simple rules, even when these rules employ parameters that are set without accounting for model uncertainty.     

A quantile-boosting approach to forecasting gold returns

We use a quantile-boosting approach to compute out-of-sample forecasts of gold returns. The approach accounts for model uncertainty and model instability, and it allows forecasts to be computed under asymmetric loss functions. Different asymmetric loss functions represent different types of investors (optimists versus pessimists). We document how the performance of a simple trading rule varies across investor types.     

Probabilistic characterization of directional distances and their robust versions

In this work, we analyze the performance of production units using the directional distance function which allows to measure the distance to the frontier of the production set along any direction in the inputs/outputs space. We show that this distance can be expressed as a simple transformation of radial or hyperbolic distance. This formulation allows to define robust directional distances in the lines of α-quantile or order-m partial frontiers and also conditional directional distance functions, conditional to environmental factors. We propose simple methods of estimation and derive the asymptotic properties of our estimators.     

Heterogeneous expectations and debt in a growth model for a small open economy

We extend an aggregative growth model for a small open economy by developing a framework in which boundedly rational agents raise credit in proportion to their expected income. Moreover, these agents are heterogeneous in the sense that they switch between an extrapolative and a regressive forecasting rule with respect to perceived market circumstances. Using a mixture of analytical and numerical tools, we attempt to describe the characteristics of our model’s dynamical system. Our results then suggest that self-fulfilling short-run expectations do not only have important consequences for fluctuations in economic activity but are also a source of simple endogenous dynamics.