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.     

DETERMINING THE APPROPRIATE DISCOUNT RATES IN PURE CAPITAL RATIONING

This paper proposes an interpretation of the pure capital rationing problem as it is faced by many managers in decentralized firms in which budgets serve as the principal means of control. It is argued that the appropriate objective for situations such as these is the maximization of either undiscounted earnings over the planning horizon or total value of the investments at the horizon. When either objective function is used in conjunction with the frequently encountered linear programming models for the capital rationing problem, shadow prices result which give rise to discount rates that will reproduce the optimal solution using discounted cash flow as a criterion. These results are then used as a means for clarifying several confusing and misleading statements that have appeared in the literature.     

A COMPUTER SIMULATION APPROACH TO THE TEACHING OF MAIL SURVEY STRATEGY ALTERNATIVES AND CHOICE

The author uses a computer simulation of mail questionnaire response rates to acquaint students with trade-offs in terms of survey cost, accuracy, and time. In the absence of a theoretical base in the literature, the approach familiarizes students with current issues and problems, and helps to develop a decision-making framework for this survey method. A step-by-step procedure emphasizing student involvement is described.     

SPECTRAL ANALYSIS IN BUSINESS FORECASTING: THE WIENER-KOLMOGOROV METHOD *

The objective of this paper is to introduce the Wiener-Kolmogorov (WK) method to business researchers and to applied workers who have an interest in spectral techniques. It is seen that the advantage of the WK method is that it provides better forecasts than autoregressive regression analysis when the order of the true autoregressive process is large. The paper outlines the steps involved in the WK method. Also discussed is a labor-saving feature to guide one at the outset as to whether the WK algorithm should be used. A numerical example is given to illustrate the application of the method in time-series forecasting.     

A COMPARATIVE ANALYSIS OF THE PREDICTIVE ABILITY OF ADAPTIVE FORECASTING,RE-ESTIMATION,AND RE-IDENTIFICATION USING BOX-JENKINS TIME-SERIES ANALYSIS ON QUARTERLY EARNINGS DATA

This paper assesses the predictive ability of the Box-Jenkins methodology when utilized in an on-going setting. Three procedures are utilized to update the original forecasts generated from the Box-Jenkins models: adaptive forecasting, re-estimation, and re-identification. The results indicate that constant monitoring of the structure and parameters of the time-series models are necessary through time. It appears that adaptive forecasting techniques are insufficient to update BJ time-series models when used in conjunction with quarterly earnings data. Re-estimation is recommended as each new observation becomes available. Re-identification procedures are recommended on a less frequent basis.     

ON THE DESIGN OF HIERARCHICAL PRODUCTION PLANNING SYSTEMS

To provide effective managerial support for decisions related to production planning and scheduling processes, it is useful to partition the set of decisions into a hierarchical framework. In the resulting system, higher level decisions impose constraints on lower level actions, and lower level decisions provide the necessary feed-back to reevaluate higher level actions. The purpose of this paper is to suggest optimum procedures to deal with the resulting subproblems and to analyze the interaction mechanisms among the different hierarchical levels. Computational results are given.     

Symbols Build Communication and Thought: The Role of Gestures and Words in the Development of Engagement Skills and Social‐emotional Concepts during Toddlerhood

Social skills and symbol skills are positively associated in middle childhood, but the relation between these domains is less clear in newly verbal toddlers. Vygotsky proposed that symbols are both tools for interaction and mental tools for thought. Do symbols help even very young children build skills for interacting with and conceptualizing the social world? Longitudinal data from 108 children and mothers were collected when children were 14, 24, and 36 months. Children's gestures and words during mother–child interactions were used as symbol skill indicators to predict children's abilities to engage others and the number of social‐emotional concepts children portray during play. In a series of growth models, words had a stronger effect on engagement skills whereas early gesture use predicted later development of social‐emotional concepts. Therefore, even in early development, symbols serve as both communication tools and mental tools to construct understanding of the social‐emotional world.     

Adolescent Sibling Relationship Quality and Adjustment: Sibling Trustworthiness and Modeling,as Factors Directly and Indirectly Influencing These Associations

The main goal of this study was to examine the direct and moderating effects of trustworthiness and modeling on adolescent siblings' adjustment. Data were collected from 438 families including a mother, a younger sibling in fifth, sixth, or seventh grade (M = 11.6 years), and an older sibling (M = 14.3 years). Respondents completed Web‐based surveys describing sibling conflict and warmth. Siblings reported on trustworthiness and modeling, and mothers described adjustment. Sibling conflict was directly associated with internalizing and externalizing behaviors for both siblings. The older siblings' reports of trustworthiness were directly associated with the outcome measures. The younger siblings' reports of trustworthiness were less directly associated, but a possible salutary effect was most evident under the highest levels of sibling conflict or warmth. Higher sibling modeling was a risk factor for adjustment problems in relations characterized by high conflict. Results support exploring trustworthiness as a key dimension of sibling relations.