COMPETITIVE PRIORITIES: INVESTIGATING THE NEED FOR TRADE‐OFFS IN OPERATIONS STRATEGY

A heated debate continues over the need for trade‐offs in operations strategy. Some researchers call for plants to focus on a single manufacturing capability and devote their limited resources accordingly, while others claim that advanced manufacturing technology (amt) enables concurrent improvements in quality, cost, flexibility, and delivery. Yet there is little empirical evidence for or against the trade‐off model. In response, this study addresses the question: “To what extent do manufacturing plants view competitive priorities as trade‐offs?” We employ survey data collected from managers and operators in 110 plants that have recently implemented AMT. Our findings suggest that trade‐offs remain. However, perceived differences in competitive priorities are subtle and may vary across levels of the plant hierarchy.     

DICTATORS AND THEIR VIZIERS: ENDOGENIZING THE LOYALTY–COMPETENCE TRADE‐OFF

The possibility of treason by a close associate has been a nightmare of most autocrats throughout history. More competent viziers are better able to discriminate among potential plotters, and this makes them more risky subordinates for the ruler. To avoid this, rulers, especially those who are weak and vulnerable, sacrifice the competence of their agents, hiring mediocre but loyal subordinates. Furthermore, any use of incentive schemes by a personalistic dictator is limited by the fact that all punishments are conditional on the dictator’s own survival. We endogenize loyalty and competence in a principal‐agent game between a dictator and his viziers in both static and dynamic settings. The dynamic model allows us to focus on the succession problem that insecure dictators face.     

OPTIMAL MONETARY POLICY AND FINANCIAL STABILITY IN A NON‐RICARDIAN ECONOMY

I present a model with discontinuous asset‐market participation (DAMP), where all agents are non‐Ricardian, and where heterogeneity among market participants implies financial‐wealth effects on aggregate consumption. The implied welfare criterion shows that financial stability arises as an additional and independent target, besides inflation and output stability. Evaluation of optimal policy under discretion and commitment reveals that price stability may no longer be optimal, even absent inefficient supply shocks: some fluctuations in output and inflation may be optimal as long as they reduce financial instability. Ignoring the heterogeneity among market participants may lead monetary policy to induce substantially higher welfare losses.     

MULTIPLE OBJECTIVES IN LINEAR PROGRAMMING –AN EXAMPLE IN SCHEDULING POSTAL RESOURCES

This paper describes a methodology to treat multiple objectives in a mathematical programming problem. A linear programming model is developed for the short-term manpower scheduling problem in a post office so as to get a desirable balance between mail transit times and resource expenditures. The scheduling problem is of particular interest because of 1) the multiplicity of objectives, 2) the existence of several mail classes, each having different arrival patterns, routings, and dispatch times, and 3) the complexity of the different scheduling options available. The paper demonstrates how the model can be used experimentally to obtain model parameters which, in the judgment of management, achieve a desirable balance between objectives. Once the parameters are determined, the model prescribes how to vary the overtime usage, reassign workers to the various work stations, and adjust the priorities of the mail classes. The model has indirect use in studying the effects of changing work capacities, dispatch schedules, and mail arrival patterns.     

LABOR‐MARKET HETEROGENEITY,AGGREGATION, AND POLICY (IN)VARIANCE OF DSGE MODEL PARAMETERS

Data from a heterogeneous‐agents economy with incomplete asset markets and indivisible labor supply are simulated under various fiscal policy regimes and an approximating representative‐agent model is estimated. Preference and technology parameter estimates of the representative‐agent model are not invariant to policy changes and the bias in the representative‐agent model’s policy predictions is large compared to predictive intervals that reflect parameter uncertainty. Since it is not always feasible to account for heterogeneity explicitly, it is important to recognize the possibility that the parameters of a highly aggregated model may not be invariant with respect to policy changes.     

DIFFUSING KNOWLEDGE WHILE SPREADING GOD'S MESSAGE: PROTESTANTISM AND ECONOMIC PROSPERITY IN CHINA, 1840–1920

We provide an account of how Protestantism promoted economic prosperity in China—a country in which Protestant missionaries penetrated far and wide during 1840–1920, but only a tiny fraction of the population had converted to Christianity. By exploiting the spatial variation in the missionaries’ retreat due to the Boxer Uprising to identify the diffusion of Protestantism, we find that the conversion of an additional communicant per 10,000 people increases the overall urbanization rate by 18.8% when evaluated at the mean. Moreover, 90% of this effect comes from knowledge diffusion activities associated with schools and hospitals erected by the missionaries. (JEL: N35, Z12, O18)     

THE APPLICABILITY OF THE MAXI–MIN PRINCIPLE TO PORTFOLIO SELECTION IN TERMS OF MEANS AND VARIANCES OF UNKNOWN DISTRIBUTIONS

This paper establishes two propositions which allow a risk-a verse decision maker to apply a maxi-min strategy in his portfolio selection. The strategy consists of selecting a portfolio in which the lower bound of the expected utility is maximized. The propositions have their greatest applicability in situations in which the investor knows the means and variances of the portfolio returns, but has no other knowledge relating to the probability distributions governing the rates of return.