31 research outputs found
Adaptive Policies for Sequential Sampling under Incomplete Information and a Cost Constraint
We consider the problem of sequential sampling from a finite number of
independent statistical populations to maximize the expected infinite horizon
average outcome per period, under a constraint that the expected average
sampling cost does not exceed an upper bound. The outcome distributions are not
known. We construct a class of consistent adaptive policies, under which the
average outcome converges with probability 1 to the true value under complete
information for all distributions with finite means. We also compare the rate
of convergence for various policies in this class using simulation
Optimal use of scale economies in the Federal Reserveâs currency infrastructure
Could the Federal Reserve lower its overall currency processing costs by reallocating its high-speed currency sorting volume? Given estimates of currency shipping costs and scale economies for high-speed sorting, the authorsâ model minimizes costs by optimal distribution of sorting volumes across possible processing sites, while maintaining levels of service to depository institutions. Their key findings are that most of the potential savings can be achieved without closing any existing processing sites and that locating a new site in Phoenix would help lower System processing costs.Federal Reserve banks - Costs ; Money
Optimal employment of scale economies in the Federal Reserve's currency infrastructure
Given estimates of shipping costs and scale economies for high-speed currency sorting, the authors investigate whether the Federal Reserve might lower its costs by reallocating the volume of sorting among its processing sites.Money ; Federal Reserve banks - Costs
Coordinating Lot Sizing Decisions Under Bilateral Information Asymmetry
We consider inventory management decisions when manufacturing and warehousing are controlled by independent entities. The latter possess private information that affects their choices and are allowed to communicate via a mediator who attempts to streamline their decisions without restricting their freedom. The mediator designs a mechanism based on quantity discounts to minimize the overall system costs, attempting to reach a winâwin situation for both entities. Using the Revelation Principle we show that it is in the entitiesâ selfâinterest to reveal their information and we prove that coordination is attainable even under bilateral information asymmetry. The acceptable cost allocation is not unique, providing adequate flexibility to the mediator during mechanism design; the flexibility may reflect the relative power of the entities and is quantified in our work by a series of computational experiments. Our approach is motivated by inventory management practices in a manufacturing group and, thus, it is directly applicable to realâlife cases
Option Pricing with Downward-Sloping Demand Curves: The Case of Supply Chain Options
This article investigates the role of option contracts in a supply chain when the demand curve is downward sloping. We consider call (put) options that provide the retailer with the right to reorder (return) goods at a fixed price. We show that the introduction of option contracts causes the wholesale price to increase and the volatility of the retail price to decrease. In general, options are not zero-sum games. Conditions are derived under which the manufacturer prefers to use options. When this happens the retailer is also better off, if the uncertainty in the demand curve is low. However, if the uncertainty is sufficiently high, then the introduction of option contracts alters the equilibrium prices in a way that hurts the retailer.real options, downward-sloping demand curve, Stackelberg games, supply chain contracts