Resolving uncertainty in manufacturing systems

This paper examines the effectiveness of three commonly practiced methods used to resolve uncertainty in multi-stage manufacturing systems: safety stock under regenerative material requirements planning (MRP) updates, safety capacity under regenerative MRP updates, and net change MRP updates, i.e., continuous rather than regenerative (periodic) updates. The use of safety stock reflects a decision to permanently store materials and labor capacity in the form of inventory. When unexpected shortages arise between regenerative MRP updates, safety stock may be depleted but it will be replenished in subsequent periods. The second method, safety capacity, overstates the MRP capacity requirements at the individual work centers by a prescribed amount of direct labor. Safety capacity either will be allocated to unanticipated requirements which arise between MRP regenerations or will be spent as idle time. The third method, net change, offers a means of dealing with uncertainty by rescheduling instead of buffering, provided there is sufficient lead time to execute the changes in the material and capacity plans.Much of the inventory management research has addressed the use of safety stock as a buffer against uncertainty for a single product and manufacturing stage. However, there has been no work which evaluates the performance of safety stock relative to other resolution methods such as safety capacity or more frequent planning revisions. In this paper, a simulation model of a multi-stage (fabrication and assembly) process is used to characterize the behavior of the three resolution methods when errors are present in the demand and time standard estimates. Four end products are completed at an assembly center and altogether, the end products require the fabrication of twelve component parts in a job shop which contains eight work centers. In addition to the examination of the three methods under different sources and levels of uncertainty, different levels of bill of material commonality, MRP planned lead times, MRP lot sizes, equipment set-up times and priority dispatching rules are considered in the experimental design.The simulation results indicate that the choice among methods depends upon the source of uncertainty, and costs related to regular time employment, employment changes, equipment set ups and materials investment. For example, the choice between safety stock and safety capacity represents a compromise between materials investment and regular time employment costs. The net change method is not designed to deal effectively with time standard errors, although its use may be preferred over the two buffering alternatives when errors are present in the demand forecasts and when the costs of employment changes and equipment set ups are low. The simulation results also indicate that regardless of the method used, efforts to improve forecasts of demands or processing times may be justified by corresponding improvements in manufacturing performance.     

Optimal trade execution in order books with stochastic liquidity

In financial markets, liquidity changes randomly over time. We consider such random variations of the depth of the order book and evaluate their influence on optimal trade execution strategies. If the stochastic structure of liquidity changes satisfies certain conditions, then the unique optimal trading strategy exhibits a conventional structure with a single wait region and a single buy region, and profitable round‐trip strategies do not exist. In other cases, optimal strategies can feature multiple wait regions and optimal trade sizes that can be decreasing in the size of the position to be liquidated. Furthermore, round‐trip strategies can be profitable depending on bid–ask spread assumptions. We illustrate our findings with several examples including the Cox–Ingersoll–Ross model for the evolution of liquidity.     

Understanding the Death Benefit Switch Option in Universal Life Policies

Universal life policies are the most popular insurance contract design in the United States. They provide either a level death benefit paying a fixed face amount or an increasing death benefit paying a fixed benefit plus the available cash value, and both types include the option to switch from one type to the other. In this article, we investigate the fact that—unlike a switch from level to increasing—a switch from an increasing death benefit to a level death benefit requires neither fees nor evidence of insurability. To assess the impact of the death benefit switch option, we develop a model framework of an increasing universal life insurance policy embedding this option. Consideration of heterogeneity with respect to mortality via a stochastic differential mortality factor enables an investigation of adverse exercise behavior. In a comprehensive simulation analysis, we quantify the net present value of the option from the insurer's perspective using risk‐neutral valuation under stochastic interest rates assuming empirical exercise probabilities. Based on our results, we provide policy recommendations for life insurers.     

The direct employment effects of new businesses in Germany revisited: an empirical investigation for 1976–2004

Based on an improved and extended database, the Establishment History Panel, we extend the analysis of Fritsch and Weyh [Small Business Economics 27(2), 245–260 (2006)] by investigating the development of employment in German start-up cohorts for the period 1976 to 2004. We confirm the typical pattern found in start-up cohorts: an initial increasing number of employees that is soon followed by a decreasing number. We also provide some of the first evidence for the “liability of aging” phenomena in Germany. Older firms face a relatively high risk of exit. We find that most entries with relatively large initial employment grow substantially in the first two decades. However, these businesses suffer from a considerable employment decline after 25 years.     

Women and international assignments: the impact of supervisor-subordinate relationships

During the past two decades, more and more organizations have been going global, and, as a result, more and more employees are being sent on international assignments. For the most part, though, the percentage of females being sent on these assignments is much lower than the percentage of males. Several recent studies have suggested that the supervisor-subordinate relationship might be a critical determinant of who gets selected for expatriate assignments. To explore this issue in some detail, the leader-member exchange (LMX) model is used to examine the link between supervisor-subordinate relationships and selection for international assignments. Strategies that female employees can use to improve their chances of being sent on international assignments are also suggested.     

Does rising consumer debt signal future recessions?: Testing the causal relationship between consumer debt and the economy

This paper examines the relationship between measures of the consumer debt burden and various economic indicators. The consumer loan delinquency rate is useful in predicting consumer spending on durable goods and retail sales, while various economic indicators are useful in predicting the ratio of consumer installment credit to disposable income. The results provide no evidence for the hypothesis that a rising consumer debt burden signals any slowdown in the growth of consumer spending and the economy. Instead, the results indicate that rising consumer indebtedness is a normal occurrence in an economic expansion. It remains to be seen whether innovations in credit card usage, along with the growing use of substitutes for traditional consumer loans, will have an impact on the causal relationship between consumer debt and the economy.     

Social Position and Distributive Justice: Experimental Evidence

Using a simple, double-blind dictator experiment, we examine the extent to which subjects' choices of distributive shares are influenced by unearned social position. We measure social position by the initial distributive shares (resources) and the subjects' ability to determine the final distributive shares (power). We find that subjects' decisions are consistent with Rawls' (1971) hypothesis that individuals expect a greater share when in a position with more power and initial resources. Finally, we test if subjects' choices under a laboratory veil of ignorance are consistent with Rawls' concept of distributive justice. “Veiled” individuals exhibit preferences that are less risk-averse and have greater variance than Rawls hypothesized.     

An econometric analysis of energy over the next 75 years

Preliminary results from an econometric model with a 75-year time-horizon to determine base-load power generation mix is described. A number of conventional, evoloutionary and speculative generation systems are considered, together with constraints imposed by fuel availability and technical development times.     

Trends in Job Quality for African-American Workers, 1979–2011

Economists expect that increases in education and work experience will increase workers’ productivity and translate into higher compensation. We use data from the March Current Population Survey (CPS) to show that over the past four decades, the “human capital” of the employed black workforce has increased enormously, yet the share of black workers in a “good job” --one that pays at least $19 per hour (in inflation-adjusted 2011 dollars), has employer-provided health insurance, and an employer-sponsored retirement plan-- has actually declined. The CPS data show that black women saw a modest increase in access to “good jobs,” but the share of black men in good jobs decreased. Despite improvements for black women, they were consistently less likely to be in a good job than black men in every year in our sample. Black workers at every age and education level were also less likely to be in a good job in 2011 than they were in 1979.     

Climate-induced migration: using mental models to explore aggregate and individual decision-making

The US Dust Bowl of the 1930s (a prolong period of drought experienced in the United States accompanied by severe sand storms) is often described as an abnormal event. However, climate change is likely to increase the frequency and impact of similar occurrences. Because of this, a growing number of scholars have begun to examine multiple facets of climate-induced migration from various disciplinary traditions. Specifically, scholars have called for continued research into individual decision-making processes. Responding to this call, we construct a mental model from historical interviews of those who migrated to California during the US Dust Bowl. Our model provides insight into the migration process with a unique focus on individual decision-making processes of migrants.