Order Promising and the Master Production Schedule*

Previous research on material requirements planning (MRP) systems has rarely considered the impact of the master production scheduling method used to promise customer orders and to allocate production capacity. Based on a simulation study of an MRP environment, we show that the correct selection of a master production schedule (MPS) method depends on the variance of end-item demand. In addition, we find evidence that the effectiveness of a particular MPS method can be enhanced by holding buffer inventory at the same level in the product structure as in the MPS.     

Measurement error, skewness, and risk analysis: coping with the long tail of the distribution.

Probabilistic risk analyses often construct multistage chance trees to estimate the joint probability of compound events. If random measurement error is associated with some or all of the estimates, we show that resulting estimates of joint probability may be highly skewed. Joint probability estimates based on the analysis of multistage chance trees are more likely than not to be below the true probability of adverse events, but will sometimes substantially overestimate them. In contexts such as insurance markets for environmental risks, skewed distributions of risk estimates amplify the "winner's curse" so that the estimated risk premium for low-probability events is likely to be lower than the normative value. Skewness may result even in unbiased estimators of expected value from simple lotteries, if measurement error is associated with both the probability and pay-off terms. Further, skewness may occur even if the error associated with these two estimates is symmetrically distributed. Under certain circumstances, skewed estimates of expected value may result in risk-neutral decisionmakers exhibiting a tendency to choose a certainty equivalent over a lottery of equal expected value, or vice versa. We show that when distributions of estimates of expected value are, positively skewed, under certain circumstances it will be optimal to choose lotteries with nominal values lower than the value of apparently superior certainty equivalents. Extending the previous work of Goodman (1960), we provide an exact formula for the skewness of products.     

The Effect of Risk Beliefs on Property Values: A Case Study of a Hazardous Waste Site1

Health risk beliefs of homeowners near a landfill site were assessed in a survey and compared to expert judgments of the health risks of living near the site. A bimodal distribution of health risk beliefs suggested sharp disagreement between the experts and at least some of the residents. Correlates of high risk beliefs included perception of odor from the site, exposure to media coverage of the problem, having children living at home, age (younger respondents more concerned), and gender (females more concerned). An aggregated neighborhood health risk belief predicted reductions in home prices even after controlling for home physical characteristics, such as size and other disamenities such as proximity to a freeway. In the 4100 homes near the site, the estimated depression in property values was estimated to total about $40.2 million before the site was closed and to be about $19.7 million after closure. Implications of these results for community conflict and for benefit-cost analysis of hazard site remediation are discussed.     

THE SOCIAL MANAGEMENT OF AMBITION

This study of "the social management of ambition' (Hopper 1968) analyzes the changes in occupational expectations that occur among a group of ambitious high school seniors during the seven years after graduation. The predictions of a socialization and of a social reproduction model of the process of expectations change are compared using data from the National Longitudinal Study of the High School Class of 1972. Loglinear analysis is used to estimate a model, with a focus on the roles played by race, gender, social origins, and marriage. Less than one-fifth of the original sample remained "on track' toward achieving their original goals, most often members of already advantaged groups (whites and those from upper-middle-class homes). Married women were among the "cumulatively disadvantaged,' unlike their single peers. Marriage in particular had very different consequences for members of different social groups.     

Decisions concerning the allocation of scarce medical resources

This paper aimed to determine the criteria participants use to make decisions about scarce medical resources (allocation to use a kidney machine). It varied information about patients on 4 factors (sex, smoking, employment status, community service). It also set out to see if decisions made in groups differed from aggregated decisions of those made alone. In the first study, participants completed a simple questionnaire requiring them to rank-order sixteen hypothetical patients. In the second study, a group discussion (in groups of three participants) preceded the group putting an agreed rating on the identical questionnaire. Participants favoured patients who were employed, non-smokers and participated in community service. This suggests that participants adopted a utilitarian moral ideology. Participants' smoking habits interacted with the hypothetical patients' smoking habits, indicating in-group favouritism. In the second study it was found that when the decision was made in a group of three it amplifies the decision made by an individual. In this sense there was clear evidence of group polarization.     

The dynamics of Young Men's career aspirations

Career aspirations have assumed a central place in our understanding of the process of social mobility, yet aspirations themselves have been subject to remarkably little scrutiny. We conduct an empirical analysis of the dynamics of aspirations in a cohort using data from the National Longitudinal Survey of Young Men. Our results indicate that (1) occupational aspirations decline with age; (2) the overwhelming majority of young men have high aspirations at some point; (3) occupational aspirations, highly unstable among teenagers, become more stable with age; and (4) differences by race and social origin grow with age, reflecting growing race and social class differences in educational attainment.An earlier draft of this paper was presented at the American Sociologial Association Annual Meeting, San Francisco, August 1989.     

Insurance for low-probability hazards: A bimodal response to unlikely events

Two insurance experiments using real-money consequences and multiple rounds to provide experience are described. In the first experiment, subjects bid for insurance to prevent a fixed loss of 4 at probabilities ranging from .01 to .9. Mean bids were near expected value except at the lowest probability of.01, for which a very bimodal distribution was observed (some subjects bid zero and others bid much more than expected value). A second experiment explored this bimodality at a probability of .01 with loss increased to4 at probabilities ranging from .01 to .9. Mean bids were near expected value except at the lowest probability of.01, for which a very bimodal distribution was observed (some subjects bid zero and others bid much more than expected value). A second experiment explored this bimodality at a probability of .01 with loss increased to 40. A similar bimodal distribution was obtained that persisted over 50 rounds of experience. These laboratory results are consistent with field evidence for low-probability hazards, for which people appear either to dismiss the risks or to worry too much about them.We would like to thank Alan Carlin, Ann Fisher, Risa Palm, and David Brookshire for their helpful comments on an earlier version of this article, and Rebecca Boyce, Julie Irwin, Glenn Russell, and Joy Smith for research assistance. We also gratefully acknowledge support from the University of Colorado Council on Research and Creative Work for human subject payments and from the U.S. Environmental Protection Agency, Office of Policy, Planning and Evaluation for support for research design and analysis provided as part of Cooperative Agreement #CR812054. All errors, opinions and conclusions are the sole responsibility of the authors.