Winner's Curse Corrections Magnify Adverse Selection

The adverse-selection literature has only considered the case in which competing sellers' costs of supply are independent and privately known by the individual sellers. In contrast, the auction literature has ignored adverse selection by implicitly assuming that a bid-taker is indifferent between suppliers at a given price. We show that competition in auctions with common-value elements serves to magnify the impact of adverse selection, as a bidder supplying a higher-cost product rationally makes a heightened winner's curse correction in a procurement auction. Hence lower-cost suppliers are disproportionately likely to win the auction, potentially creating a more serious quality problem for the procurer than mainstream adverse-selection models suggest.winner's curse; adverse selection; common-value auctions; procurement; product quality

Project management decisions with uncertain targets

Project management decisions with uncertain target

Winner's Curse Corrections Magnify Adverse Selection

The adverse-selection literature has only considered the case in which competing sellers' costs of supply are independent and privately known by the individual sellers. In contrast, the auction literature has ignored adverse selection by implicitly assuming that a bid-taker is indifferent between suppliers at a given price. We show that competition in auctions with common-value elements serves to magnify the impact of adverse selection, as a bidder supplying a higher-cost product rationally makes a heightened winner's curse correction in a procurement auction. Hence lower-cost suppliers are disproportionately likely to win the auction, potentially creating a more serious quality problem for the procurer than mainstream adverse-selection models suggest

Managing Systems Engineering Projects with Uncertain Requirements

Prior to being alerted that a requirement has changed, project management typically recommends that an engineer treat that requirement as fixed. But proper risk management emphasizes that all uncertainties should be explicitly recognized prior to making any decisions. Hence the engineer should explicitly recognize the possibility that their requirements may change. As a result, systems engineering indexes each requirement by its stability, which reflects its probability of changing. Building on this insight, this paper presents a new technique for considering the uncertainty associated with any requirement in design decisions.Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/151910/1/iis2610.pd

A Decision Analytic Approach to Reliability-Based Design Optimization

Abstract Reliability-based design optimization is concerned with designing a product to optimize an objective function given uncertainties about whether various design constraints will be satisfied. However, the widespread practice of formulating such problems as chance-constrained programs can lead to misleading solutions. While a decision analytic approach would avoid this undesirable result, many engineers find it difficult to determine the utility functions required for a traditional decision analysis. This paper presents an alternative decision analytic formulation which, though implicitly using utility functions, is more closely related to probability maximization formulations with which engineers are comfortable and skilled. This result combines the rigor of decision analysis with the convenience of existing optimization approaches

Is near basal blood pressure a more accurate predictor of cardiorenal manifestations of hypertension than casual blood pressure?

Measurement of casual and near basal systolic and diastolic blood pressures were correlated with the severity of cardiorenal manifestations of hypertension in 471 patients. There was a significant association of each of the four blood pressure measurements with each other (P All four blood pressure measurements were significantly associated (r >= 0.78, P The level of blood pressure is the important correlate of these manifestations of hypertension. This is equally true whether systolic, diastolic, casual or near basal measurements are used. Near basal blood pressure does not correlate better with the cardiorenal manifestations of hypertension than casual blood pressure, neither does diastolic blood pressure correlate better with these manifestations than systolic blood pressure.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/22749/1/0000304.pd