Optimization Criteria in Dynamic Operations Models: Discounting and Risk Neutrality

Presented by Matt SobelWilliam E. Umstattd Professor, Weatherhead School of Management, Case Western Reserve UniversityThere is overwhelming evidence that people are sensitive to risk, but stochastic optimization model for supply chain management usually presuppose a risk-neutral decision maker. This talk concerns the representation of preferences in dynamic stochastic models. How should joint preferences for risk and timing be represented? This talk explains(a) why the usual representation in economics and finance is logically inconsistent, and (b) how to do it right! The talk briefly indicates the effects of doing it right in the standard dynamic newsvendor models that coordinate operational and financial decisions. Matt Sobel is the William E. Umstattd Professor at the Weatherhead School of Management at Case Western Reserve University. His research interests include stochastic optimization models, coordination of operations with finance and marketing, supply chain management, choices made over time and under uncertainty, environmental management, and entrepreneurship. He is an INFORMS Fellow, and his numerous publications have appeared in all the INFORMS journals. He authored (with Daniel Heyman) the book Stochastic models in Operations Research.10/27/2006 Hoffman Hall 404, 10:30 - 12:00

Location: H. Leslie Hoffman Hall Of Business Administration (HOH) - 404

Audiences: Everyone Is Invited

Contact: Georgia Lum