TWO-PIECE VON NEUMANN-MORGENSTERN UTILITY FUNCTIONS*

Thirty empirically assessed utility functions on changes in wealth or return on investment were examined for general features and susceptability to fits by linear, power, and exponential functions. Separate fits were made to below-target data and above-target data. The usual “target” was the no-change point. The majority of below-target functions were risk seeking; the majority of above-target functions were risk averse; and the most common composite shape was convex-concave, or risk seeking in losses and risk averse in gains. The least common composite was concave-concave. Below-target utility was generally steeper than above-target utility with a median below-to-above slope ratio of about 4.8. The power and exponential fits were substantially better than the linear fits. Power functions gave the best fits in the majority of convex below-target and concave above-target cases, and exponential functions gave the best fits in the majority of concave below-target and convex above-target cases. Several implications of these results for decision making under risk are mentioned.     

AN APPROXIMATION TO THE HYPERCUBE MODEL WITH PATROL-INITIATED ACTIVITIES: AN APPLICATION TO POLICE

This paper applies the patrol-initiated-activity hypercube queuing model to historical data from a police agency. The model allows servers to handle both calls assigned by a central dispatcher and activities initiated by the servers. By duplicating a fairly complex dispatch strategy, the model was found to predict both assigned and server-initiated work loads accurately for the overall system and individual servers. The model is apparently ineffective in predicting small unit-travel-time differences for this police agency.     

EMPIRICAL UTILITY FUNCTIONS AND RANDOM DEVICES: AN EXPERIMENT

The primary purpose of the present experiment was to examine the effects on the empirical derivation of executive's utility functions caused by the use of random device analogues. The results indicate that utility functions obtained using a random device analogue imply more risk aversion than when these functions are determined by simulating actual decision situations. Furthermore, there is also evidence that the bias is directly related to the monetary amounts involved.     

A NOTE ON AN APPLICATION OF THE ANALYTIC HIERARCHY PROCESS

This note is a response to an article by Zahedi [2] published in the Winter 1985 issue of Decision Sciences. It demonstrates that there is no need to calculate eigenvalues for consistent pairwise comparison matrices in order to calculate normalized values of attributes.     

A NOTE ON OPTIMAL PORTFOLIO SELECTION UNDER STABLE PARETIAN DISTRIBUTIONS*

Elton, Gruber, and Padberg's [2] [3] ranking procedure and Kwan's [6] nonranking procedure for optimal portfolio selection lead to the same solution. This is because of a particular functional property of the cutoff rate for security performance. In this note, the robustness of that functional property is demonstrated the normality of security returns assumed in the above studies is relaxed to encompass the general family of stable Paretian distributions. The proof here is an important step toward portfolio analysis using some multiindex models when securities cannot be ranked.     

A NOTE ON MODELING PROJECT INTERDEPENDENCE IN RESEARCH AND DEVELOPMENT*

This note is concerned with the problem of resource allocation under uncertainty in a research and development laboratory. A distinction is defined between project interrelationships that are specific (or internal) to certain projects and interrelationships resulting from external environmental factors. Formulations are introduced that allow both types of interrelationships to be formally included in a resource allocation optimization model. In the case of external environmental factors, an example is presented and analyzed.     

ASSESSMENT OF MULTIATTRIBUTED MEASURABLE VALUE AND UTILITY FUNCTIONS VIA MATHEMATICAL PROGRAMMING*

A major restriction on the use of decision analysis in practice is the frequent difficulty of determining a decision maker's multiattribute utility function. The assessment process can be complex and tedious and generally involves: (1) identifying relevant independence conditions, (2) assessing conditional utility functions, (3) assessing scaling constants, and (4) checking for consistency. Some of the assessment and modeling complexities encountered include an assessor's inability to respond in a quantitatively meaningful and consistent way to hypothetical gambles and an analyst's problem in selecting an appropriate functional form that accurately characterizes the conditional utility assessments. A simplified procedure that mitigates these difficulties is proposed. This procedure facilitates the determination of scaling constants by obtaining (via mathematical programming) a multiattributed measurable value function which is converted to a multiattributed utility function. The methodology can be developed advantageously to produce an interactive software package for use as an assessment aid.     

THE DEVELOPMENT OF AN INTEGRATIVE CURRICULUM IN AN UNDERGRADUATE BUSINESS PROGRAM*

This paper describes how the core portion of the undergraduate business program at Indiana University was revised to facilitate integration of basic functionally oriented decision making skills and thus help students gain a deeper understanding of the interdependence of business decisions. It relates, in essence, why and how a single computer-oriented case study which demanded a solution to a large-scale, unified finance-marketing-production problem was used at Indiana University, mentions how we plan to accomplish further integration of functional material, and provides some insight into student reaction to what was, in fact, a massive project from both student and administrative points of view.     

AN EMPIRICAL ASSESSMENT OF COMPUTER-ASSISTED DECISION ANALYSIS*

Decision analysis tools often are used in semistructured and ill-structured situations. While some researchers have argued that computerized decision analysis programs may improve decision quality in such situations, research support for this assertion is weak. In this laboratory study, business students used a computerized decision-analysis program with short strategic-management cases to prepare decision reports. Independent raters' perceptions of aided and unaided decision performance were contrasted, attitudes of students toward the program were assessed, individual differences were correlated with attitudes, and the program's impact on students' perceptions of their decision processes and performance was examined. Student attitudes toward the computerized aid were favorable, and individual differences in reactions generally were as predicted. However, the program did not improve the independent ratings of students' decision reports and recommendations. These findings suggest that computerized decision aids should be adopted cautiously. If such aids result in positive user affect and heightened decision confidence without corresponding improvements in decision quality, they may be dysfunctional. Rigorous research methodologies which incorporate independent evaluations of analyses and decisions are recommended for use in future research on computerized decision-analysis programs.     

A NOTE ON THE ASSESSMENT OF THE RESULTS IN A DISCRIMINANT ANALYSIS *

This paper describes two statistical measures that can be applied to the analysis of the results in a discriminant analysis. These measures, similar to R² and R² in multiple regression, assess the “goodness of fit” of the model or the degree of separation established by the discriminant functions among the groups in the sample and in the population.     

SOME RESEARCH AND TEACHING WITH AN ON-LINE OLIGOPOLY GAME USING AN ARTIFICIAL PLAYER*

Teaching and research can be integrated using an artificial player. A series of studies are reported that note the assets and liabilities of using an on-line oligopoly game with an artificial player. By appropriately combining teaching and gaming research costs may be lowered, the learning experience increased, and the validity of the research increased.     

AN APPLICATION OF QUEUING THEORY TO A CONGESTION PROBLEM IN AN OUTPATIENT CLINIC*

The purpose of this paper is to discuss an application of queuing theory as an analytical framework for evaluating the adequacy of physician capacity in an outpatient clinic for medically indigent patients. Specific attention is given to the problems of parameter estimation including service and waiting cost. A method is also discussed whereby the relationship of physician cost and patient waiting cost may be imputed after the fact from observation of actual clinic operations.     

AN OPEN LETTER: TQM ON THE CAMPUS*

This letter is from the chairmen of American Express, Ford, IBM, Motorola, Proctor & Gamble, and Xerox. These companies sponsor Total Quality Forum, an annual gathering to discuss total quality management.     

AN INDEX FOR THE MEASUREMENT OF CONSUMER LOYALTY*

The concept of consumer “loyalty” (i.e., preference for a particular store or brand) is intriguing to marketing scholars and practitioners. Research in this area would be enhanced by the acceptance of an operational measure of consumer loyalty. Loyalty appears to be a tri-dimensional concept; per cent of budget, allocated to the store or brand, amount of switching, and number of alternatives explored have been used to measure loyalty. Consequently, the authors propose a “loyalty index” which combines these three measures. An empirical test of the proposed index showed that the index did discriminate among degrees of consumer loyalty, and was related to consumer psychological characteristics in a manner similar to that of the generally used single measures of consumer loyalty.     

AN APPROACH FOR IMPROVED INTERPRETATION OF MULTIVARIATE ANALYSIS *

This paper proposes a method, canonical rotation analysis, which facilitates the substantive interpretation of results in multivariate analysis. Canonical rotation analysis is developed as a model which integrates multivariate least squares approaches and the varimax rotation criterion. The generalized applicability of the model to canonical correlation, multiple discriminant analysis, and multivariate analysis of variance is developed. The advantages and limitations of canonical rotation analysis are discussed and illustrated in the context of an industrial marketing research problem.