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  • Articles  (29)
  • risk  (23)
  • Approximation
  • 1990-1994  (20)
  • 1985-1989  (9)
  • 1970-1974
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  • Economics  (29)
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  • 1
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    Journal of productivity analysis 5 (1994), S. 271-286 
    ISSN: 1573-0441
    Keywords: risk ; economies of diversification ; agricultural production ; flexible functional forms
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract In this article we analyze the relationship between risk-avoidance behavior and economic jointness in a multi-output agricultural technology. We focus on farmer specific heterogeneity in attitudes towards risk-taking, while treating production uncertainty as unobserved stochastic error that is common to all region specific farms. We furthermore utilize a new flexible functional form, the Constant Elasticity of Transformation, Constant Elasticity of Substitution, Generalized Leontief (Behrman, Lovell, Pollak, and Sickles, [1992]) which has the appealing property of relative flexibility while ensuring proper curvature properties of the estimated multi-output technology over a larger sample region of the price/quantity space than a flexible form such as the Generalized Leontief [Diewert, 1971]. Our empirical study deals with small-scale agriculture in the Indian Semi-Arid Tropics (SAT), partly because of the importance of yield-related risk in this region, but also because we have measures of farmer specific risk attitudes in the SAT data. Our modeling approach allows for the calculation of the shadow cost of farmer specific risk attitudes in terms of foregone profits, while at the same time controlliing for the technical factors that give rise to multi-output production in the absence of risk. We are thus able to estimate these opportunity costs while modeling a multiple output technology in which cost complementarities can lead to diversified production and in which joint production is not always undertaken.
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  • 2
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    Journal of risk and uncertainty 9 (1994), S. 135-150 
    ISSN: 1573-0476
    Keywords: quality-adjusted life-years index ; life expectancy ; social welfare ; discounting ; risk ; utility
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract Applying cost/benefit techniques to issues of life and death generally requires a single index, comparable to gross domestic product, describing the welfare of any community in terms of the health, quality of life, wealth, and longevity of its population. While such indices, based on economic and multiattribute utility theory, do exist, they generally require detailed information on the preferences of the affected individuals. Since gathering such detailed information is often prohibitively expensive and time-consuming, this article derives a simpler index of community welfare. Our index evaluates any proposed government project using a weighted geometric average of the project's anticipated impact on •per capita wealth less the weighted proportion of individuals with various disabilities, and •per capita life expectancy adjusted to discount future years of life. Since the criterion measures the overall utility of society, it can also be used to compare quality of life in various countries.
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  • 3
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    Journal of cultural economics 18 (1994), S. 271-300 
    ISSN: 1573-6997
    Keywords: Film ; Hollywood ; risk ; management ; organization ; policy ; persistences
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    Topics: Art History , Economics
    Notes: Abstract Integrated international marketing of films and related merchandise and close financial ties between distributors and roducers have evolved to cope with the risks of piracy, cost containment, opportunism, and revenue uncertainty. Our reading of the evidence is that this system has dominated because of its efficiency. In search of an explanation of why America remains the centre of this institutional and contractual web, we examine the impact of two world wars, the rapid commercialization of new technologies in the United States by aggressive managers, an open financial system and the ethnic diversity, language homogeneity, and size of the domestic market.
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  • 4
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    Mathematical methods of operations research 39 (1994), S. 93-122 
    ISSN: 1432-5217
    Keywords: Approximation ; Integration ; Sequential Stochastic Decision Process ; Discretization
    Source: Springer Online Journal Archives 1860-2000
    Topics: Mathematics , Economics
    Notes: Abstract We consider convex stochastic multistage problems and present an approximation technique which allows to analyse the error with respect to time. The technique is based on barycentric approximation of conditional and marginal probability spaces and requiresstrict nonanticipativity for the constraint multifunction and thesaddle property for the value functions.
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  • 5
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    Journal of risk and uncertainty 7 (1993), S. 117-139 
    ISSN: 1573-0476
    Keywords: insurance pricing ; decision making ; risk ; ambiguity
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    Topics: Economics
    Notes: Abstract The factors influencing insurance pricing decisions are assessed using the ISO product liability ratemaking files for 1980–1984. The mean loss level has a strong positive effect on manual rates and premium rates/exposure. Evidence on a variety of ambiguity measures is more mixed. As a broad generalization, risk ambiguity lowers manual rates, which may reflect exclusion of large loss outliers as being unrepresentative. Risk ambiguity tends to have a positive effect on actual pricing decisions for particular policies, especially bodily injury lines and the interactive risk-ambiguity model.
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  • 6
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    Journal of risk and uncertainty 6 (1993), S. 255-275 
    ISSN: 1573-0476
    Keywords: gambling ; risk ; uncertainty
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    Topics: Economics
    Notes: Abstract A tiny utility of gambling is appended to an expected utility model for a risk-averse individual. It is shown that the model can explain small payoff gambles, large prize lotteries, and patterns of risk-seeking in the experimental evidence that are puzzling from the viewpoint of standard theory. At the same time, the model maintains expected utility theory's ability to explain insurance purchase, portfolio diversification, and other risk-averting behavior. The tiny utility of gambling could equally well be appended to models of risky choice other than the expected utility model.
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  • 7
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    Journal of risk and uncertainty 6 (1993), S. 75-90 
    ISSN: 1573-0476
    Keywords: risk ; value of life ; psychometric characteristics
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    Topics: Economics
    Notes: Abstract A large sample of the residents of metropolitan Chicago were interviewed to investigate whether psychometric attributes by which people view hazards are related to their willingness-to-pay to reduce the hazard. One of the hazards, stomach cancer, is found to engender fear and a high willingness-to-pay. Among the other hazards, willingness-to-pay increases with the dread of the hazard but declines with degree of knowledge people have about the risk they are exposed to. When adjustment is made for perceived probability of occurrence, one can conclude that the implied valuation of life varies across hazards according to psychometric risk perceptions. This result has practical implication for policy makers when making decisions regarding spending to reduce hazards.
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  • 8
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    Review of industrial organization 8 (1993), S. 113-123 
    ISSN: 1573-7160
    Keywords: Regulation ; returns ; risk ; utilities
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    Topics: Economics
    Notes: Abstract This paper demonstrates that, even after adjustment for risk, state utility commissions are sensitive to the return on equity requests of electric utilities. This supports the hypothesis that commissions and utilities implicitly compensate for other ratemaking factors, so as to arrive at a reasonable rate of return. Publicized differences in allowed returns have superficial informational content with regard to regulatory treatment. An implication is that commissions are more efficient in both the performance of their duties and in the allocation of resources than is usually assumed.
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  • 9
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    The journal of real estate finance and economics 6 (1993), S. 201-222 
    ISSN: 1573-045X
    Keywords: Housing ; risk ; return ; repeat-sales
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    Topics: Economics
    Notes: Abstract This article uses recent measures of the risk and return to investment in housing to estimate the effects of including a single family home in the investor portolio. We estimate the expected return and standard deviation of that return, as well as its correlation with other major investment classes.
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  • 10
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    Journal of risk and uncertainty 5 (1992), S. 127-144 
    ISSN: 1573-0476
    Keywords: expected utility ; risk ; behavioral decision theory ; forecast-combination ; expectations
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    Topics: Economics
    Notes: Abstract Psychological experiments have established that the classical expected utility model appears descriptively inadequate. Viscusi's prospective reference theory attempts to reconcile the expected utility model with many of these experiments by supposing that individuals have prior expectations about the utility they can expect to get from lottery payoffs. Bayesian theory then implies that individuals revise lottery probabilities in light of these prior expectations before choosing among lotteries so as to maximize expected utility. But Viscusi's theory cannot account for nonmonotonic or intransitive behavior. This article develops an extension of Viscusi's model with correlated prior beliefs that does account for nonmonotonic and intransitive behavior.
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  • 11
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    Journal of risk and uncertainty 5 (1992), S. 247-251 
    ISSN: 1573-0476
    Keywords: insurance ; automobile insurance ; risk ; moral hazard ; adverse selection
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract The theory of propitious selection suggests that there are risk-avoiding personalities who both take physical precautions and buy financial security (insurance). Conversely, there are risk seekers who tend to do neither. Survey evidence is presented that is consistent with the theory. Individuals who obtain motor vehicle liability coverage are less likely than others to drink-and-drive, and are more likely to engage in health-beneficial (risk-avoiding) behaviors. Propitious selection may be a general phenomenon promoting favorable selection in many real world insurance markets.
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  • 12
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    Annals of operations research 31 (1991), S. 371-384 
    ISSN: 1572-9338
    Keywords: Approximation ; nonlinear programming algorithms ; stochastic program with recourse
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    Topics: Mathematics , Economics
    Notes: Abstract This paper summarizes the main results on approximate nonlinear programming algorithms investigated by the author. These algorithms are obtained by combining approximation and nonlinear programming algorithms. They are designed for programs in which the evaluation of the objective functions is very difficult so that only their approximate values can be obtained. Therefore, these algorithms are particularly suitable for stochastic programming problems with recourse.
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  • 13
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    Journal of risk and uncertainty 4 (1991), S. 153-165 
    ISSN: 1573-0476
    Keywords: risk ; benefit ; expected utility
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    Topics: Economics
    Notes: Abstract Theoretical models for estimating individuals' values for sure improvements in environmental quality are well developed. These models can be classified as being based on averting behavior, hedonic prices, or weak complementarity. Some of these models have also been applied to the task of valuing changes in risk based on expected utility theory. This article provides a systematic development of these models for changes in either the probability or the magnitude of an uncertain event and shows that the derived expressions for individual marginal willingness to pay can be generalized to nonexpected utility preferences as long as the index of preferences is continuous, convex, and twice differentiable.
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  • 14
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    Journal of risk and uncertainty 4 (1991), S. 167-175 
    ISSN: 1573-0476
    Keywords: insurance ; moral hazard ; relief ; risk
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    Topics: Economics
    Notes: Abstract Government relief is offered for a wide range of risks-natural disaster, economic dislocation, sickness, and injury. This article explores the effect of such relief on incentives and the allocation of risk in a model with private insurance. It is shown that government relief is inefficient, even when its level is less than the private insurance coverage that individuals would otherwise have purchased and even when private insurance coverage is incomplete due to problems of moral hazard.
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  • 15
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    Journal of risk and uncertainty 4 (1991), S. 329-338 
    ISSN: 1573-0476
    Keywords: gambling ; insurance ; risk ; risk aversion ; probability shifting ; utility theory
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    Topics: Economics
    Notes: Abstract Will a more risk-averse individual spend more or less to improve probabilities, say on marketing efforts that enhance the chance of a sale? For any two payoffs and starting probabilities, the answer is unfortunately indeterminate. However, interpreting gambling as increasing small chances of good outcomes and insurance as reducing small chances of bad outcomes, the more risk-averse individual will pay less (more) to gamble (insure). We find a critical switching probability that depends on the individuals and outcomes involved. If the good outcome is less (more) likely than this critical value, the expenditures represent gambling (insurance).
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  • 16
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    The journal of real estate finance and economics 4 (1991), S. 175-190 
    ISSN: 1573-045X
    Keywords: Returns ; risk ; appraisal ; commercial property ; smoothing ; REIT
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract Basic information is provided on the returns and risks from 1978 through 1985 for unleveraged equity real estate compared with stocks and bonds. Data sources include the Russell-NCREIF index, the Evaluation Associates index, and the Goldman Sachs equity real estate investment trust index. Findings reveal that the aggregate return for the publicly traded equity real estate investment trust index in nearly twice that of the other real estate series, and more than twice that of the Standard & Poor index. The equity real estate investment trust is far more volatile than the other two real estate series. Neither the Goldman Sachs nor the other two indexes exactly measure the returns or risks on equity real estate. The volatility of the equity real estate investment trust leads it to overstate the risk of this investment category, while the other two indexes are not return indexes. Estimates from this study indicate that real estate risk lies plausibly midway between that of stocks and bonds, in the 9 percent to 13 percent range.
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  • 17
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    The journal of real estate finance and economics 4 (1991), S. 327-345 
    ISSN: 1573-045X
    Keywords: Returns ; risk ; appraisal ; smoothing ; commerical properties
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    Topics: Economics
    Notes: Abstract This article presents a conceptual analysis of smoothing in the second moments of appraisal-based returns series in commercial real estate. The intent of the article is to lay the groundwork necessary for the more scientific use of appraisal-based returns time series for the purpose of inferring the true second moments. Formal smoothing models are presented together with their theoretical implications for smoothing in various second moments of interest to investment analysts. Empirical estimators for inferring true moments from appraisal-based data are described. Limited empirical findings from previous literature are also briefly discussed in the light of the theoretical findings of this study. The overall conclusion is that appraisal-based returns can be very useful in studying the risk characteristics of commercial real estate assets, provided that this type of data is corrected for smoothing as discussed in the article.
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  • 18
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    Review of industrial organization 6 (1991), S. 49-59 
    ISSN: 1573-7160
    Keywords: mergers ; risk ; diversification
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    Topics: Economics
    Notes: Abstract The implications of diversification by firms for risk has been raised particularly in connection with conglomerate mergers. This issue is of special interest in banking now because of a recently implemented policy — risk-based capital guidelines. This study presents results of an empirical investigation into the relationship between diversification of a bank's financial assets and indicators of the risk of insolvency. Results indicate that financial asset diversification, as well as geographic diversification, are related to lower risk.
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  • 19
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    Journal of risk and uncertainty 3 (1990), S. 191-204 
    ISSN: 1573-0476
    Keywords: risk ; self-protection ; self-insurance
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    Topics: Economics
    Notes: Abstract We develop four experimental markets to examine how individuals respond to risk: self-protection and self-insurance in both private and collective auctions. First, we find evidence that the mechanism used to reduce risk is important. Results indicate that the upper and lower bounds on value were elicited by the private self-protection and the collective self-insurance markets, respectively. Second, the robustness of these results declined with low-probability lotteries. We find further evidence that individuals overestimate the impact of low-probability events. Overestimation decreased, however, with repeated market exposure. Third, the four markets induced rapid value formation. Usually only one or two additional market trials were necessary before an individual's perception and valuation of reduced risk stabilized.
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    Journal of risk and uncertainty 3 (1990), S. 65-82 
    ISSN: 1573-0476
    Keywords: risk ; uncertainty ; mean-preserving spreads ; star-shape
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    Topics: Economics
    Notes: Abstract A characterization of comparative risk, parallel to but more restrictive than the Rothschild-Stiglitz (1970) characterization, is developed. As in Rothschild and Stiglitz, we develop a four-way characterization that consists of generating processes (a noise condition and generation by a sequence of special mean-preserving spreads), integral conditions, and preferences. The building blocks of this new order, Mean-preserving increases in risk about ν, where ν is any constant, are mean-preserving spreads whose centers have a nonempty intersection. If this intersection contains the mean of the distribution, the induced order, or mean-preserving increase in risk about the mean, conveys a particularly meaningful notion of an increase in risk as a buildup of the tails of the distribution.
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  • 21
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    Journal of risk and uncertainty 2 (1989), S. 5-35 
    ISSN: 1573-0476
    Keywords: Ambiguity ; expected utility ; insurance ; risk ; subjective probability
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract In a series of experiments, economically sophisticated subjects, including professional actuaries, priced insurance both as consumers and as firms under conditions of ambiguity. Findings support implications of the Einhorn-Hogarth ambiguity model: (1) For low probability-of-loss events, prices of both consumers and firms indicated aversion to ambiguity; (2) As probabilities of losses increased, aversion to ambiguity decreased, with consumers exhibiting ambiguity preference for high probability-of-loss events; and (3) Firms showed greater aversion to ambiguity than consumers. The results are shown to be incompatible with traditional economic analysis of insurance markets and are discussed with respect to the effects of ambiguity on the supply and demand for insurance.
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  • 22
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    Journal of risk and uncertainty 2 (1989), S. 235-263 
    ISSN: 1573-0476
    Keywords: risk ; expected utility ; irrationality ; prospect theory
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract This article develops a variant of the expected utility model termed prospective reference theory. Although the standard model occurs as a limiting case, the general approach is that individuals treat stated experimental probabilities as imperfect information. This model is applied to a wide variety of aberrant phenomena, including the Allais paradox, the overweighting of low-probability events, the existence of premiums for certain elimination of risks, and the representativeness heuristic. The prospective reference theory model predicts most of the observed behavioral patterns rather than being potentially reconcilable with such phenomena.
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  • 23
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    Theory and decision 27 (1989), S. 93-106 
    ISSN: 1573-7187
    Keywords: cognition ; decision ; graphs ; artificial intelligence ; risk ; uncertainty ; expert systems ; expected utility
    Source: Springer Online Journal Archives 1860-2000
    Topics: Sociology , Economics
    Notes: Abstract In the first part, we try to give a representation of the process by which man endeavours to grasp uncertainty. We propose a backward exploration which we will modelize through an influence diagram and then we can draw a few conclusions from that representation for the axiomatics of Decision. In the second part, we deal with the processing of the information formatted in such a way, regarding both its temporal complexity and its elective complexity. The first part as the second one dealing with representation and the consequences for information processing of uncertainty cognition lead to a severe criticism of the expected utility hypothesis. To conclude, we suggest a few remarks on expert systems of decision aid under uncertainty.
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    Theory and decision 26 (1989), S. 263-293 
    ISSN: 1573-7187
    Keywords: utility ; risk ; value ; game theory ; consequences ; Bayesian
    Source: Springer Online Journal Archives 1860-2000
    Topics: Sociology , Economics
    Notes: Abstract In this paper, a problem for utility theory - that it would have an agent who was compelled to play “Russian Roulette’ with one revolver or another, to pay as much to have a six-shooter with four bullets relieved of one bullet before playing with it, as he would be willing to pay to have a six-shooter with two bullets emptied - is reviewed. A less demanding Bayesian theory is described, that would have an agent maximize expected values of possible total consequence of his actions. And utility theory is located within that theory as valid for agents who satisfy certain formal conditions, that is, for agents who are, in terms of that more general theory, indifferent to certain dimensions of ‘risk’. Raiffa- and Savage-style arguments for its more general validity are then resisted. Addenda are concerned with implications for game theory, and relations between ‘utilities’ and ‘values’.
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    Mathematical methods of operations research 33 (1989), S. 21-37 
    ISSN: 1432-5217
    Keywords: Network Flows ; Parametric Optimization ; Approximation
    Source: Springer Online Journal Archives 1860-2000
    Topics: Mathematics , Economics
    Description / Table of Contents: Zusammenfassung Wir betrachten maximale Flußprobleme, in denen die Kapazitäten lineare Funktionen eines Parameterst ∈ [0,T] sind. Da dieses Problem ein Spezialfall eines parametrischen linearen Programms ist, kann man den klassischen horizontalen Ansatz anwenden, mit dem optimale Lösungen sukzessive auf Teilintervallen von [0,T] bestimmt werden. Wir stellen einen alternativen Algorithmus vor, der in jeder Iteration die optimale Lösung für allet ∈ [0,T] approximiert. Dieser vertikalen Ansatz ist eine Art Markierungsalgorithmus, wobei die Flußvariablen stückweise lineare Funktionen sind. Flußvergrößerungen werden aufbedingten flußvergrößernden Wegen durchgeführt, die mittels modifizierter kürzester Wege Algorithmen gefunden werden können. Der vertikale Algorithmus kann sowohl zur Berechnung des optimalen parametrischen Flusses als auch zur Berechnung einer guten Approximation für allet benutzt werden, falls sich herausstellt, daß die Berechnung der optimalen Lösung zu zeitaufwendig ist.
    Notes: Abstract We consider the problem of finding maximal flows with respect to capacities which are linear functions of a parametert ∈ [0,T]. Since this problem is a special case of a parametric linear program the classichorizontal approach can be applied in which optimal solutions are computed for successive subintervals of [0,T]. We discuss an alternative algorithm which approximates in each iteration the optimal solution for allt ∈ [0,T]. Thisvertical algorithm is a labeling type algorithm where the flow variables are piecewise linear functions. Flow augmentations are done alongconditional flow augmenting paths which can be found by modified path algorithms. The vertical algorithm can be used to solve the parametric flow problem optimally as well as to compute a good approximation for allt if the computation of the optimal solution turns out to be too time consuming.
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    Mathematical methods of operations research 33 (1989), S. 109-129 
    ISSN: 1432-5217
    Keywords: Loss Systems ; Output Processes ; Simulation ; Approximation
    Source: Springer Online Journal Archives 1860-2000
    Topics: Mathematics , Economics
    Description / Table of Contents: Zusammenfassung Für das BedienungsmodellG/G/1 ohne Warteraum wird eine Approximation des Abgangsprozesses im stationären Zustand angegeben, wobei allgemein verteilte Zwischenankunfts- und Bedienungszeiten angenommen sind. Ferner werden für den Fall, daß mehrere solche Bediener in Reihen geschaltet sind, approximative Resultate angegeben und mit Simulationen überprüft.
    Notes: Abstract The departure process from aG/G/1 loss system with generally distributed interarrival time, generally distributed service time, a single server, and no waiting room is approximated in steady state. Furthermore, the tandem behavior of the system is approximated, approximation results are provided, and are compared against those from a simulation study.
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    Theory and decision 24 (1988), S. 169-200 
    ISSN: 1573-7187
    Keywords: decision theory ; risk ; expected utility ; security level ; risk aversion
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    Topics: Sociology , Economics
    Notes: Abstract The particular attention paid by decision makers to the security level ensured by each decision under risk, which is responsible for the certainty effect, can be taken into account by weakening the independence and continuity axioms of expected utility theory. In the resulting model, preferences depend on: (i) the security level, (ii) the expected utility, offered by each decision. Choices are partially determined by security level comparison and completed by the maximization of a function, which express the existing tradeoffs between expected utility and security level, and is, at a given security level, an affine function of the expected utility. In the model, risk neutrality at a given security level implies risk aversion.
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    Annals of operations research 8 (1987), S. 93-101 
    ISSN: 1572-9338
    Keywords: Approximation ; empirical studies ; heavy traffic results ; moment approximations ; queueing approximations
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    Topics: Mathematics , Economics
    Notes: Abstract Numerical evaluation of waiting time distributions for M/G/1 systems is somewhat difficult. This paper examines a simple variation of the heavy traffic formula which may be useful at modest levels of traffic intensity. One can justify the heavy traffic approximation by expressing the Laplace transform of the service time distribution as a Maclaurin series and then truncating to three terms. The spectrum factorization and inversion leads in a straightforward fashion to the heavy traffic approximation. If one carries two additional terms from the Maclaurin series, the characteristic equation is a cubic with exactly one real negative root. This root provides an easy way to extend the heavy traffic formula to cases where the traffic is not so heavy. This paper studies the quality of this approximation and includes some numerical evaluation based on data actually encountered.
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    Mathematical methods of operations research 30 (1986), S. A65 
    ISSN: 1432-5217
    Keywords: Dynamic Programming ; Approximation ; Bounds ; Inventory model ; (s, S)-policies
    Source: Springer Online Journal Archives 1860-2000
    Topics: Mathematics , Economics
    Description / Table of Contents: Zusammenfassung Es wird ein allgemeines dynamisches Optimierungsmodell mit endlichem Horizont betrachtet. Für verschiedene Näherungsverfahren für die minimalen erwarteten Gesamtkosten und die optimale Politik werden Schranken angegeben. Die Theorie wird sodann auf ein Lagerhaltungsmodell angewandt, um Schranken für „gute“ Bestellpolitiken zu erhalten.
    Notes: Summary We consider a general finite stage dynamic programming model. Bounds are derived for the approximation of the minimum expected total cost and of the optimal policy. The theory is applied to an inventory model to give bounds for “good” order policies.
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