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Management Science Group 
1972 - 73 

July 1974 718 - 74 
Management Science Group 





MAR i 3 -7? 


Management Science Group 
1972 - 73 

July 1974 718 - 74 
Management Science Group 


The purpose of this report is to make available to inter- 
ested people information on the existence and content of re- 
search going on in the Management Science Group of the Sloan 
School of Management. The report contains 

1. Titles and abstracts of M.S.G. faculty publications 
for the period of July 1972 through June 1973. 

2. Abstracts of theses supervised by M.S.G. faculty 
during the same period. 

If further information is desired about any specific item, 
the individual authors may be contacted. Estimates of copies of 
theses may be obtained from the Micro Reproduction Laboratories, 
14-0551, M.I.T. 

John D. C. Little 

1972 - 73 

Arnold E. Amstutz * 
Gordon F. Bloom 
Jerry D. Dermer 
David Durand 
G. Anthony Gorry 
John U. Farley * 
Warren H. Hausman 
Arnoldo C. Hax 
Thomas M. Hill * 
Malcolm M. Jones 
Gordon M. Kaufman 
Ralph L. Keeney ** 
Paul R. Kleindorfer ** 
John D. C. Little 
Stuart E. Madnick 
Thomas L. Magnanti 
William A. Martin * 
Philippe A. Naert * 
David N. Ness 
John F. Rockart 
Michael S. Scott Morton 
Murat R. Sertel * 
Jeremy F. Shapiro ** 
James S. Shulman 
Alvin J. Silk 
Glen L. Urban ** 
Roy E. Welsch 
Leon S. White * 

* part time MSG 
** on leave 



1 . Public Management 

1.1 Family Planning 1 

1.2 Ci ti zen Feedback 2 

1.3 Productivity 2 

1.4 Energy 3 

1 . 5 Transportati on 4 

2. Private, Non-Profit Organizations 

2.1 Health Clinics 5 

2.2 Education 7 

3. Business 

3.1 Marketing 8 

3.2 Production and Operations Management 13 

3.3 Other Business Applications 15 


1. Statistics and Stochastic Processes 16 

2. Mathematical Optimization 18 

3. Information Systems 20 

4. Planning and Control 22 

5. Other Methodological Research 24 


Name Index for Faculty Publications 


Bloom, G. F. 
Dermer, J. D. 
Hammann, P. 
Hausman, W. H. 
Hax, A. C. 
Kaufman, G. M. 
Little, J. D. C. 
Madnick, S, E. 
Magnanti , T. L. 
Naert, P. A. 
Rockart, J, F. 
Sertel , M. R, 
Shapiro, J. F. 
Silk, A. J. 
Urban, G. L. 
Welsch, R. E. 




3, 15 


= 23 





, 15 




4, 8, 9 


, 21 






6, 7 













1. Public Management 

1 .1 Family Planning 

GLEN L. URBAN, A Model for the Management of a Family Planning System , 
SSM Working Paper 613-72, Revised June, 1973. 

This paper describes a planning model designed to be used by managers of 
family planning systems to improve understanding, forecasting, and plan- 
ning. The macro-flow model describes the patient movement through post 
partum and non-post partum programs. The flows model the phenomena of: 
outreach recruitment, continuance, post partum checkups, switching methods, 
referral, migration, contraceptive use experience, private protection, 
method effectiveness, advertising response, follow up, abortion, and med- 
ical services. Strategic variables can be linked to the flow parameters 
to produce capacity requirements and budgetary implications. The output 
includes benefit measures of total active patients, couple years of pro- 
tection, "births protected", and unwanted births prevented. The fertility 
aspects of births prevented are modeled through a non-stationary Markov 
process submodel which considers demographic phenomena without burdening 
the basic flow structure. The input procedures used to process patient 
visit, outreach, clinic survey, and experimental data are discussed and 
some empirical results are reported. The combination of data based 
estimates and subjective judgment is done by "fitting" the model to past 
observed data. Testing and control are done by "tracking" model performance 
through conditional prediction, diagnosis, and updating. 

The model is implemented in an on-line, conversational program that 
facilitates evolutionary model building by allowing the user to specify 
his model options. The application and testing o^ the model in the Atlanta 
Area Family Planning System are discussed and the e. neriences of managers 
in using the model to gain new insights, forecast, ^uriget, and plan are 

GLEN L. URBAN, Using a Model as a Practical Management Tool for Family Plan- 
ning Programs., (with R. W. O'Connor) American Journal of Public Health , 
(November, 1972). 

One point of departure for examining the use of information and report- 
ing systems by managers in an organization, including those concerned with 
family planning, should be a review of what those managers actually do. What 
activities are carried out? What kinds of decisions does the manager face? 
What information supports these activities -- and how, in fact, is the in- 
formation used to meet managerial needs? 

In organizing this discussion of local family planning program manage- 
ment, we will briefly: 1) introduce a framework to define and position the 
decisions faced by family planning managers; 2) use this framework to out- 
line the areas in which most management information system work has been 
done to date and where substantial work remains to be done; and 3) present 
an approach to the structuring of some strategic planning decisions related 

APPLICATIONS: Public Management 

to family planning: Specifically, experience with a planning model, use of 
supporting data systems, and a particular application in Atlanta, Georgia, 
will be discussed. 

1 .2 Citizen Feedback 

JOHN D.C. LITTLE, "Puerto Rico's Citizen Feedback System," in Drake, Keeney, 
and Morse, eds.. Analysis of Public Systems , (with C.H. Stevens, and P. Tropp), 
M.I.T. Press, 1972. 

Citizen Feedback may be defined as information from citizens directed to 
societal institutions, particularly government, in order to improve their func- 
tioning. Feedback can be divided into two broad categories: service feedback, 
which includes inquiries, requests and complaints, and opinion feedback, which 
includes opinions, suggestions, and volunteering. 

A service feedback system has been established in Puerto Rico. A Feed- 
back Division is part of the Governor's Office and is staffed by Citizen Aides 
whose function is to respond to letters, phone calls, and visits from citizens. 
The Citizen Aide is a "non-buck-passer," that is, if a citizen is referred else- 
where in government, the aide retains responsibility for following through on 
the case. An island-wise 24 hour phone service makes the system available to 
citizens at all times. Feedback reports provide information on the numbers and 
types of citizen concerns, including requests for service, complaints about 
government programs, and the delays in providing service. This information 
can then be used by the executive department and other branches of government 
to improve government functioning. 

1 .3 Productivity 

GORDON F. BLOOM, "Distrihuiion of Food," Chapter 12 in U.S. Nutrition Policies 
in the Seventies , Jean Mayer, ed., San Francisco: W.H. Freeman and Company, 
1973, pp. 124-139. 

In this chapter the writer directs his attention to the role than can and 
should be played by food retailers in providing better nutrition for American 
consumers. The shortcomings of the food distribution system in meeting the 
needs of low-income shoppers both in urban and rural areas are analyzed. The 
need for amendment of the food stamp program and for nutritional education is 
also discussed. 

APPLICATIONS: Public Management 

GORDON F. BLOOM, "The Systems Approach to Improved Productivity in Distribution. 
International Journal of Physical Distribution , Vol. 3, No. 3, Spring 1973, 
pp. 174 - 181. 

The article discusses the evolution of the systems approach and points 
out that there are major discrepancies between maximization of a company's 
productivity and industry productivity. Examples are cited from experience 
in the food industry in the United States. The need for standardization and 
for a systems approach through industry committees in order to reduce distri- 
bution costs is examined. 

1 .4 Energy 

GORDON M. KAUFMAN, "Reward and Uncertainty in Exploration Programs," (with Paul 
G. Bradley), Arctic Geology , Memoir, No. 19, The American Association of Petro- 
leum Geologists, 1973. 

The attractiveness of a petroleum exploration program depends on the ex- 
pected return and the associated risk. Previous analyses of drilling programs 
have dealt with particular aspects of uncertainty. The variable which has re- 
ceived the most attention has been size of reservoirs. Various skewed proba- 
bility density functions have proved consistent with empirical observation. 
Estimates of the expected value and variance of this variable have been casu- 
ally interpreted as measures of the economic reward and the degree of risk, 
respectively, of specific exploration programs. The size of reservoir found, 
however, is only one aspect of the uncertainty in exploratory drilling. Among 
the other variables which have an important bearing on the economics of the 
program are the probability of making a discovery, the depth of the producing 
formation, and the productivity of the wells. The possible stochastic descrip- 
tions of the most significant variables have cotri!/, i- ! effects on the attractive- 
ness of a venture. 

GORDON M. KAUFMAN, "Two Stochastic Models Useful in Petroleum Exploration," 
(with Paul G. Bradley), Arctic Geology , Memoir, No, 19, The American Associa- 
tion of Petroleum Geologists, 1973. 

What probability law characterizes the spatial distribution of oil and 
gas fields in a petroleum province? How does the probability that a wildcat 
well will penetrate a reservoir change (if at all) as the history of a basin 

The answers to these questions are important inputs to any model of the 
process of exploring for oil and gas. Some attention has been devoted to these 
questions, but there are deficiencies in the treatments of each. 

Our objective is twofold: (1) to posit a reasonable model of the spatial 
distribution of petroleum reservoirs that conforms to several empirically ob- 
served facts about such distribution; and (2) to examine a simple first-order 

APPLICATIONS: Public Management 

model of the exploration process that allows one to test empirically the hypo- 
thesis that, at an early stage in the exploration of a basin, the process be- 
haves like sampling without replacement. 

The techniques of inference outlined will be useful in predicting proper- 
ties of an unexplored region. 

1 .5 Transportation 

JOHN D. C. LITTLE, "The Mixed-Integer Optimization of Traffic Signal Settings 
in a Network," (with N. Gartner, and H. Gabbay), Revision 2, Operations Re- 
search Center, M.I.T., March 1973. 

The optimal setting of traffic signals in a network requires the deter- 
mining of red and green times at each signal and the relative timing among sig- 
nals so as to minimize average drive delay or other measure of performance. 
A model of traffic has been formulated and its optimization is being approached 
through mixed-integer linear programming. Test runs using the IBM package 
MPSX have been encouraging. 



2. Private, Non-Profit Organizations 

2.1 Health Clinics 

J. F. R0CI<:ART, "Computer-Assisted History Taking - Do Patients Resent It?", 
(with E. R. Mclean and Jhg Arabian), The Hospital Medical Staff, June 1973. 

Over the past twenty years, attempts have been made to employ computers 
to aid physicians in taking patients' medical histories. Although generally 
successful from a technical standpoint, these computer-based medical history 
systems have been challenged by some physicians who believe that they dehuman- 
ize the practice of medicine and that patients resent the use of such techniques. 

In reviewing published descriptions of these systems, little evidence is 
found to support this concern. Researchers employing different approaches at 
a number of different sites have found that patients react quite favorably to 
this type of computer assistance. 

At the Lahey Clinic, the use of a computer-processed medical history ques- 
tionnaire now is administered routinely to all new patients. To date, more 
than 30,000 patients have been given the Lahey questionnaire. Recently, 2,000 
of these patients were questioned about their reaction to this technique. Of 
these, 1,138 patients did not react strongly enough to bother returning the 
attitude survey questionnaire, 379 returned them with no comments pertinent 
to the medical history questionnaire, 477 were mildly to strongly favorable 
and only 6 were unfavorable. These results are consistent, therefore, with 
the experience of others who have used computers in this fashion. 

J. F. ROCKART, "Interim Results of an Ambulatory Scheduling Project," (with 
R. C. Harrison, and B. E. Stangel), Lahey Clinic Foundation Bulletin, Volume 
22, No. 1, January-March, 1973. 

Over the past few decades many new medical techniques have been developed 
to assist physicians in delivering improved care to patients. Relatively little 
has been done with regard to developing new and improved administrative systems 
to assist in the delivery of medical care. In an attempt to fill this gap our 
research group at the Lahey Clinic Foundation has been investigating methods 
of facilitating the process of ambulatory care delivery with emphasis on the 
use of the computer to assist both the scheduling process and the delivery of f 
care itself. In essence, this paper is an interim report of progress in this 
area and an indication of some future directions. 


The project's objectives are: 

(1) Reducing the unevenness of physicians' daily schedule loads. 

(2) Expediting the patient's progress through the Clinic 

(3) Improving clerical systems, and 

(4) Assisting the management of the ambulatory care delivery process. 

APPLICATIONS: Private, Non-Profit Orgar.izations 

Some of the endeavors of the research unit have strictly been administra- 
tive. More than 20 physicians have been involved, in some manner, in the pro- 
jects that have affected medical practice and six now provide inputs to the 
project as members of the Medical/Computer Systems Committee. 

To date the work has centered in four substantive areas -- assisting physi 
cians through the provision of information, improving the routing process, 
analyzing patient service time, and providing computer assistance to appoint- 
ment secretaries and management. 

J.F. ROCKART, "Medical Records Storage; A Method for Determining Level of 
Activity," Health Services Research , Winter 1972. 

On the basis of return-visit patterris, a method is presented for determin- 
ing which medical records should be kept in the active file and how long such 
records should be kept active for criteria of desired file size, desired proba- 
bility of record use, desired percentage of successful file searches, and rela- 
tive cost of storage in active and inactive files. The method is relevant to 
both physical and computerized medical record files and can incorporate any 
additional visit patterns. Implementation of the system in the Lahey Clinic 
is described, and possibilities for further refinement of the method are dis- 

J.F. ROCKART, "Planning for an Automated Clinic Appointment System," (with 
P. Hoffman, and O.G. Farnett) originally printed in Hospital Topics , reprinted 
in Out Patient Services Journal Articles , second edition. Medical Examination 
Publishing Company, Ink. 1973. 

Traditionally, ambulatory care has received low priority in the allocation 
of hospital funds, personnel and other resources. Increasing pressure on in- 
patient facilities, however, has forced a re-evaluation of outpatient needs 
and services. Expar:'i'.g Lhird-party coverage and the continuing rise in medi- 
cal costs have also focusv-a greater attention on expediting the delivery of 
non-acute care. 

As a consequence of these factors and because of an evident need to maxi- 
mize the use of existing facilities at the combined clinics of the Massachusetts 
General Hospital (MGH) and the Massachusetts Eye and Ear Infirmary (MEEI), a 
joint study was conducted by staff members of the clinics and the Laboratory of 
Computer Science. Its basic objective was to determine the desirability of a 
computer-based appointment scheduling system. Although an automated system 
has not yet been implemented, the findings of this project have significant 
implications for other institutions interested in the design of comparable ap- 
pl ications. 

J.F. ROCKART, "Questionnaire Becomes Preadmission Tool," (with E.R.Mclean and 
JHG Changey), Hospitals, J.A.H.A. , Volume 47, June 16, 1973. 

As the demands upon the physician's time have increased, techniques designed 
to help him meet those demands, such as the use of questionnaires to aid him in 

APPLICATIONS: Private, Non-Profit Organizations 

gathering patient medical history data, have been introduced. At first, medi- 
cal history questionnaires were given directly to the physician for his review; 
more recently, computerized data processing has been introduced to edit and 
summarize the data elicited by the questionnaires. In addition, on-line com- 
puters have been used to interrogate patients directly and to print out a sum- 
mary of the interview for the physician't examination. 

As the use of automated medical history systems increases, a legitimate 
question can be raised concerning the effects of such systems upon patients. 
Indeed, a concern of many physicians regardingthis technique is that patients 
might resent it. If, in fact, patients do object to it, their reluctance could 
be a serious impediment to its acceptance by the medical profession. There- 
fore, it is appropriate to examine published accounts of patients' attitudes 
toward these systems and to report on a recent study conducted at the Lahey 
Clinic Foundation in Boston. 

2.2 Education 

J. F. ROCKART, "A Method for the Integrated Use of Learning Resources and Edu- 
cation," J ournal of Higher Education , April 1973. 

The educational literature has recorded many individual advances in tech- 
nique over the past few years. Self-study courses have been developed. Pro- 
grammed instruction has been used. Interactive computer programs have been 
developed. Professors have learned to change dry lecture techniques to more 
stimulating class discussion. However, in most cases, these advances have 
been applied one at a time . 

The course design discussed here sprang from the understanding that the 
diverse learning objectives which underlie a well-rounded and well -structured 
course lead to the utilization of many classes of learning material. These 
in turn demand diverse learning methods to be utilized -- with each type of 
material being matched by its most effective learning method and "delivered" 
by its most efficient resource -- professor, student, or technology. The im- 
plementation of this concept is reported in this paper. 

The result was an integrated use of the available learning methods and 
resources - synergistically utilizing the best of each resource in the learn- 
ing process. Measurable increases in student performance on examinations, 
course quality (as expressed by students), and academic productivity all re- 


3. Business 

3.1 Marketing 

W. H. HAUSMAN, Mail -Order Demands for Style Goods: Theory and Data Analysis , 
(with R. St.G. Sides), SSM Working Paper #611-72, July 1972. 

A number of alternative data-generating processes are explored for mail- 
order demands for seasonal style-goods. Weekly demands for 126 items over an 
18-week selling season provide the empirical data. 

Arguments are presented which result in the following candidates for data- 
generating processes: (1) ratios of successive forecasts are distributed log- 
normally; (2) ratios of successive forecasts are distributed as ;t (Student); 
(3) actual demands during unequal time periods are distributed as negative 
binomial. Analysis of the data suggests the negative binomial data-generating 
process as both most closely representing the underlying process and being 
simple to adapt to a decision model. The paper concludes with an example of 
the use of the chosen data-generating process in a decision framework, and 
deals briefly with some issues of implementation. 

JOHN D. C. LITTLE, Assumptions for a Market Share Theorem , (with David E. Bell), 
Operations Research Working Paper, OR 017-73, May 1973. 

Many marketing models use variants of the relationship: market shore equals 
marketing effort divided by total marketing effort. Usually, share is defined 
within a customer group presumed to be reasonably homogeneous and overall share 
is obtained by weighting for the number in the group. Although the basic rela- 
tionship can be assumed directly, certain insight is gained by deriving it from 
more fundamental assumptions as follows: For the given customer group, each 
competitive seller has a real-valued "attraction" with the following properties: 
(1) attraction is non-negative; (2) the attraction of a set of sellers is 
the sum of the attractions of the individual sellers; and (3) if the attrac- 
tions of two sets of sellers are equal, the sellers have equal market shares in 
the customer groups. 

It is shown that, if the relation between share and attraction satisfies 
the above assumptions, is a continuous function, and is required to hold 
for arbitrary values of attraction and sets of sellers, then the relation is: 
Share equals attraction divided by total attraction. Insofar as various fac- 
tors can be assembled into an attraction function that satisfies the assump- 
tions of the theorem, the method for calculating share follows directly. 


J. D. C. LITTLE, "Sistemas de Control Adaptable en Marketing," in M. A. McNiven, 
ed., Cuanto Invertir en Publicidad? , Instituto Nacional de Publicidad, Madrid, 

- Una empresa debe aprender de sus propias experiencias en una manera 

- Un sistema adaptive para controlar las actividades ligadas con la 
commercial izacion puede ser usado para responder preguntas administrativas 

PHILIPPE A. NAERT, Alternative Markup Decision Rules and Their Profit Impli - 
cations , SSM Working Paper # 612-72, September 1972. 

In studies of a company's marketing mix, markup decisions have not receiv- 
ed much attention. A meaningful analysis of such decisions requires knowledge 
of the channel of distribution through which a product flows before reaching 
the final consumer, and of the distribution of power among various vertical 
levels in the channel. In this paper we will examine profit implications of 
alternative markup decision rules. The general ideas will be illustrated with 

PHILIPPE A. NAERT, Optimal Competitive Marketing Behavior in Oligopoly , (with 
Jean-Jacques Lambin and Alain V. Bultez), SSM Working Paper # 643-73, January 1973. 

The problem of marketing mix optimization has received considerable atten- 
tion in the literature. For the profit maximizing firm such an optimization is 
the extension of the "marginal revenue equals marginal cost" rule to determine 
optimal levels for all marketing instruments rather than just price. Dorfman 
and Steiner derived an optimization rule for a monopolistic firm [9], which 
was subsequently applied by Palda [27] and Lambin [20] in empirical studies. 

A large number of normative models of competitive marketing behavior in 
oligopolistic markets have also been formulated. Various assumptions related 
to industry demand (stable versus expansible) and to the type of competitive 
reaction (follower versus leader) have lead to a large variety of models. Many 
of these are theoretical in nature and have not been directly applied, such 
as the competitive models, by Mills [23], Gupta and Krishnan [14, 15, 19], 
Shakun [29], Baligh and Richartz [2], Kotler [18], Naert [24], and others. 
Examples of empirical studies dealing with stable industry sales are Lambin 
(follower-type reaction) [22] and Tel ser (leader-type reaction [30], and with 
expansible industry sales are Schultz (follower) [28] and Bass (follower) [3]. 

In those studies where competitive reaction is explicitly taken into ac- 
count (leader), it is implicitly assumed that competitors react with the same 
marketing instrument as the one which causes their reactions, that is, they 
react to a change in prices by a change in price, to a change in advertising 
by a change in advertising. We will identify this kind of reaction with the 
simple competitive reaction case. It is more realistic, however, and more in 



the spirit of the \/ery concept of marketing mix , to consider what we will 
call multiple competitive reaction, that is for example, a competitor may 
react to a change in price not just by changing his price, but also by 
changing his advertising and, possibly other marketing instruments as well. 
To our knowledge no optimal ity conditions have been derived yet for the 
multiple competitive reaction case. 

In this paper we will remain within the realm of static analysis. 
First, we will derive profit maximization conditions for the multiple 
competitive reaction case. We will then demonstrate through a series of 
corollaries how optimization rules, previously developed, are special cases 
of our more general rule. The second part of this article will be devoted 
to the estimation problems arising in a multiple competitive reaction frame- 
work. Through the analysis of the data collected on a stable industry de- 
mand market, evidence of the importance of considering multiple competitive 
reactions will be presented. 

PHILIPPE A. NAERT, Retail Outlet Location: A Model of the Distribution 
Network Aggregate Performance, (with Alain V. Bultez). SSM Working Paper 
#642-73, January 1973. 

Location of sales outlets is of major concern to such organizations 

as oil companies, banks, etc. The problem is often approached in two steps. 

The total market is div'ded into regions, and the first stage amounts to 

deciding in which regions to expand or to contract. Thus for example in 

It 2t 

period t, the company (i) will add n. outlets in area 1, n. in area 2, etc. 

We will refer to the first step as the aggregate location problem. The se- 
cond stage ccnsists in choosing specific sites for these new outlets. In 
practice, these decisions are regarded as rather independent, especially 
because thoy are made at different levels in the organization. The number 
of new outlets is a corporate decision, whereas specific sites are selected 
at the regional level, sii-ject however, to approval by the corporate head- 
quarters. Many companie- feel that, at least for the time being, hierar- 
chical linking of tfie aggregate and detailed problems is neither worth the 
effort nor the cost.^ 

In this paper our sole concern will be with aggregate location. Our 
procedure will be closely related to a model developed by Hartung and Fisher [7], 
However, their work lackec' robustness, and suffered from a variety of de- 
ficiencies in ttie estimation of the model parameters. In section 2 we will 
review the Hartung-Fisher (hereafter (H-F) model and the various weaknesses 
associated with it. In section 3 the estimation problems will be examined. 
In section 4 we will propose various changes to the model which will make it 
robust, and we will use data from a major oil company in a European country 
to estimate the parameters and validate our approach. 



ALVIN J. SILK, "A Fortran IV (IBM 360) Program for Multivariate Profile 
Analysis," (with Y. Allaire, and W. H. Tsang), Journal of Marketing Re- 
search , 10 (February 1973), pp. 81-82. 

The program performs the computations required for the technique of 
multivariate profile analysis described by Morrison [4, pp. 141-8 and 186- 
94]. A mean profile is simply a graphical representation of a vector of 
average scores on several variables (e.g., psychological tests, semantic 
differential items) for a particular sample or treatment group. 

The basic input data are commensurable measures of several variables 
obtained from members of independent samples representing various groups 
or experimental treatments. The variables must be expressed in comparable 
units. Sample sizes for different groups may be unequal. 

The following output is provided: 
]_• Means are computed and printed for each variable and group. 
2^. Mean profiles are plotted for each group. 

3^. The hypothesis of parallel profiles or no groups-by -response variables 
interaction is tested by the largest characteristic root criterion using 
Heck's [2] Bg statistic described in Morrison [4, pp. 166 and 188]. See 
[1, pp. llOff] for a discussion of this and alternative criteria. 
4^. The hypothesis of identical profile heights or equal group or treatment 
effects is evaluated by a one-way univariate analysis of variance on the 
sums of the responses of each sample member across the NG groups. This 
test is only meaningful when the results of number 3 indicate no group-response 

5^. Simultaneous confidence intervals are calculated for all possible com- 
parisons between pairs of groups for each response variable in the following 
manner [4, pp. 183-4]: 

where CI.. = Confidence interval for differences in means between groups 
^^ i and j for response variable k(i = 1,...NG-1-, j = 2,...NG; 
k = 1,...NR). 

X•^, X.. = Mean values of variable k for groups i and j, respectively. 

I K J K 

N., N. = Sample sizes for groups i and j, respectively. 

e - Value read from Heck's charts [3; 4, pp. 312-9] of the 
^ upper percentage points of the greatest root distribution 

with reference to the desired a level and a set of parameters 
[4, p. 169] determined by the problem under consideration. 
References to sources of additional tables for e are given 
in [1, p. no] and [4, p. 167]. ^ 

6. Univariate F-ratios are also computed for the same comparisons noted 
Tn number 5. See [3] for a discussion of the use of simulatneous confidence 
intervals and univariate F-tests in this type of problem. The results ob- 
tained for numbers 5 and 6 are of interest in situations where the paral- 
lelism hypothesis is rejected in number 3 and it becomes desirable to test 


the equality of groups or treatments for each response variable separately. 
The program will handle problems satisfying the following capacity con- 

NG < 8 

NR < 20 

TN • NR < 16,000 


NG = Number of groups 

NR = Number of response variables 

TN = Total number of respondents (sum of the sample sizes across all 
Running time on a 360 system for a problem involving NG = 5, N = 16, and TN 
160 was 7 seconds. 

ALVIN J. SILK, "Measuring the 'Qualitative Value' of Medical Journals as 
Advertising Vehicles," (with M. Ray), Working Paper, Marketing Science 
Institute, Cambridge, Mass., March, 1973. 

In many if not most marketing situations there are both theoretical and 
practical reasons for believing that if a given audience were exposed to 
a particular ad for some product in one media vehicle rather than another, 
then the impact of such an advertising exposure would vary according to 
the vehicle in which the exposure occurred. Such a differential effect 
is commonly referred to as the "qualitative value" of media as advertising 
vehicles. The paper is concerned with developing measures of this phenomenon 
for use in advertising media planning, The first section of the paper reviews 
the relevent advertising research literature and identifies alternative ways 
to define and measure t"e concept. The second section of the paper develops 
an overall research pl?M lonred to assessing qualitative value as three stages 
of the advertising decision process -- planning, pre-testing, and post-testing. 
The final section of the paper presents a detailed research design for a field 
study to measure the qualitative value of medical journals as advertising 

ALVIN J. SILK, "Testing the Inverse Ad Size-Selection Exposure Hypothesis: 
Clarifying Bogart," Journal of Marketing Research , 10 (May, 1973), 221-223. 

A discussion of previous comments and empirical evidence bearing on 
the hypothesis that the association between prospect status and exposure 
to print advertising decreases as advertisement size increases. 



GLEN L. URBAN, PERCEPTOR: A Model for Product Design , SSM Working Paper 
#640-73, January, 1973. 

This paper presents a marketing model that aids managers in designing new 
products, repositioning old products, or realigning a product line. 

The model is based on the use of multi-dimensional scaling to describe per- 
ception and preference. These joint space maps are basic elements in a process 
of perception, preference, and product choice. Attitude change is modeled by 
the feedback of product usage on perception or preference and by the effects of 
controllable marketing variables. The model encompasses the issues of: (1) 
heterogeneity of preference and perception, (2) differences in evoked sets, 
(3) naming of perceptual dimensions, (4) linking perception and preference 
to choice, and (5) aggregation of individual data for market descriptions. The 
outputs are the sales, shares, and profits of the brands in the market. 

Consumer data on Canadian beer are used to estimate joint space maps and 
the linkages of attitudes to choice. These and the other measurement issues 
identified above are discussed. The parameters and structure of the model are 
examined based on predictive tests with saved data and alternative attitude for- 

The model is implemented in an on-line conversational model. Considerable 
flexibility exists to customize the model structure based on statistical inter- 
pretation of perception, preference, and choice data. With the model, the mana- 
ger can simulate the effects of repositioning, adding, or dropping a product. He 
also can examine the effects of controllable variables such as advertising and 
distribution on the dynamics of the market changes. With these capabilities, 
he can carry out a comprehensive review of the firm's product line strategy and 
guide the design of new products. 

3.2 Production and Operations Management 

PETER HAMMANN, A Re-Issue Policy Model , SSM Working Paper #634-72, December 1972, 

Publishing firms of books and records follow a well-known policy of re- 
issuing their products in a different format some time after the initial intro- 
duction. Paperbacks and budget-label discs are two typical formats. As they 
usually are accompanied by some price cut, two questions arise: 

- When should the product be reissued? 

-At what price should the product be marketed again? 

The following paper considers these questions from the viewpoint of quanti- 
tative analysis. A simple model is presented, deriving from a case study in 
the recording industry. Possibilities of implementation are discussed. 


ARNOLDO C. HAX, Hierarchical Integration of Production Planning and Scheduling , 
(with Harlan Meal), SSM Working Paper #656-73, May 1973. 

This paper describes the development of a hierarchical planning and schedul- 
ing system for a multiple plant, multiple product, seasonal demand situation. 
In this hierarchical structure, optimal decisions at an aggregate level (plan- 
ning) provide constraints for detailed decision making (scheduling). 

Four levels of decision making are used: first, products are assigned to 
plants (using mixed-integer programming), making long-term capacity provision 
and utilization decisions; second, a seasonal stock accumulation plan is pre- 
pared (using linear programming), making allocations of capacity in each plant 
among product Types within which the products have similar inventory costs; 
third, detailed schedules are prepared for each product Family (using standard 
inventory control methods for items grouped for production since the Items in 
a Family share a major setup), allocating the type capacity among the product 
Families in the Type; fourth, individual run quantities are calculated for each 
Item in each Family, again using standard inventory methods. 

The approximations used and the procedures developed are described in 
sufficient detail to guide a similar application. We also discuss the problems 
encountered in implementation and the approach used to resolve these problems. 
Finally, we estimate the costs and benefits of this system application. 

ARNOLDO C. HAX, "Integration of Seasonal Planning and Detailed Scheduling," 
Proceedings of the 1973 Northeast Meeting of the American Institute of Decision 
Science (forthcoming). 

This paper describes a case study dealing with the design and implementa- 
tion of an integrated production planning, inventory control and scheduling 
system for a large manufacturing company. The objective of the system is to 
provide effective guidance in medium-term planning and operational decisions in 
a manufacturing activity affected by strong seasonalities in the demand pattern 
of the various products. The essential characteristic of the system is a hier- 
archical decision makii y pproach in which the aggregate results of medium 
range planning define a co.itext and constraints for the day-to-day decisions. 

The paper describes the role played by each of the system modules and 
the way in which they interact to constitute an integrated planning, control 
and scheduling system. A reference is made to the costs and benefits associa- 
ted with the system application, as well as the problems encountered in the 
system implementation. 

ARNOLDO C. HAX, "Optimization of a Fleet of Large Tankers and Bulkers: A 
Linear Programming Approach," (with John Everett, Victor Lewinson and Donald 
Nudd, Marine Technology , 9, No. 4, 1972. 

Linear programming was used to optimize fleets of large bulkers and 
tankers (including OBOs) for the 1980s. The fleet was intended to carry 15 
percent of the U.S. foreign trade in the major dry and liquid bulk commodities. 
Guidance was obtained as to best ship designs and sizes, and, by sensitivity 
tests, benefits of standardization and backhauls were identified. Also, optimum 



ship characteristics were shown to be more sensitive to port depth than to exact 
trade forecasts, and fleet savings from relaxation of port constraints were 

ARNOLDO C. HAX, "Planning a Management Information System for a Distributing 
and Manufacturing Company," Sloan Management Review , 14, No. 3 

Many managers see a need for more effective, mechanized information systems 
within their firms. While the benefits of better information make such systems 
desirable, the potential for disaster because of sudden and sweeping changes 
often discourages large-scale reform. Therefore, introduction of more advanced 
systems is not a simple task, and a plan for development of the system is a 
necessary prerequisite. In this article. Professor Hax develops a system plan 
for a hypothetical manufacturing and distributing firm. A classification pro- 
cedure helps identify information needs within the firm, and priorities are then 
assigned to these needs. The author suggests a method for implementing the sys- 
tem and an organizational structure for directing this effort. Finally, the 
benefits and estimated costs of the plan are examined. 

3.3 Other Business Applications 

GORDON F. BLOOM, Economics of Labor Relations , (with Professor Herbert R. 
Northrup),Homewood Illinois: Richard D. Irwin, Inc, March 1973 (7th ed.). 

This is the seventh edition of a labor textbook used in college courses 
in Labor Economics. The text covers history and government; collective bar- 
gaining; economics of the labor market; governmental regulation of wages and 
hours; governmental security programs; and governmental control of labor re- 

WARREN H. HAUSMAN, The Stochastic Cash Balance Problem with Average Com - 
pensating-Balance Requirements , (with Antonio Sanchez-Bell), SSM Working 
Paper #663-73, June 1973. 

The problem under consideration involves the management of cash and short- 
term financial assets for a firm facing a compensating-balance requirement spe- 
cified as an average balance over a number of days (e.g., weekly, bi-weekly, or 
monthly). Daily net cash flows are partially unpredictable and are treated as 
stochastic (specifically, as independent random variables). We consider only 
two assets: cash, and some interest-bearing assets. 

At the end of a period, cash holdings in excess of the compensating-balance 
requirement incur an opportunity cost, in that they could have been invested in 
the interest-bearing asset. A cash level below the requirement presumably incurs 
some penalty cost, which will be assumed to be proportional to the shortfall. 
Transactions costs of converting excess cash into the earning asset and vice- 
versa make it uneconomic to "even up" daily, and create the management decision 
problem studied (in variations) here and in the references. 


1. Statistics and Stochastic Processes 

G. M. KAUFMAN, Bayesian Factor Analysis , (with S. James Press), SSM Working 
Paper #659-73, May 1973. 

In this paper we discuss the problem of factor analysis from the Bayesian 
viewpoint. First, the classical factor analysis model is generalized in sever- 
al directions. Then, prior distributions are adopted for the parameters of the 
generalized model and posterior distributions are developed in the light of ob- 
served data. Finally, we develop a large sample marginal posterior distribution 
for the elements of the factor loading matrix. It will be seen that the Bayesian 
approach provides a formal mechanism for using subjective prior information to 
eliminate ambiguities and dogmatic constraints ever present in earlier factor 
analysis models. 

G. M. KAUFMAN, "Two Distributions Involving a Bessel Function," Journal of the 
American Statistical Association , Vol. 67, No. 340, December 1972. 

Properties of the distribution of a certain sum of a normal random variable 
and the reciprocal of a gamma random variable are examined. This sum appears 
naturally in the course of doing a Bayesian analysis of the lognormal process. 

ROY E. WELSCH, "A Convergence Theorem for Extreme Values from Gaussian Se- 
quences," Annals of Probability , 1, June 1973 , pp. 398-404. 

Let {Xp, n=0, + 1, + 2,...} be a stationary Gaussian stochastic process 
with means zero, variances one, and covariance sequence {rp}. Let Mp = 
max {Xi, ..., Xp) and Sp = second largest {X-], ..., X^} . Limit properties 
are obtained for the jui.t: law of Mp and Sp as n approaches infinity. A joint 
limit law which is a function of a double exponential law is known to hold if 
the random variables X-j are mutually independent. When Mp alone is considered 
Berman has shown that a double exponential law holds in tne case of dependence 
provided either r^ log n ^- or z^zr] rp^ < °°. In the present work it is shown 
that the above conditions are also sufficient for the convergence of the joint 
law of M and Sp. Weak convergence properties of the stochastic processes 
M[-^^-] and Srpt-t with < a < t < °° are also discussed. 

ROY E. WELSCH, A Modification of the Newman-Keuls Procedure for Multiple 
Comparisons . SSM Working Paper 612-72, September 1972. 

A major criticism of the Newman-Keuls multiple comparison procedure is 
that it fails to provide adequate protection against erroneous comparisons 
when the null hypothes'-'s of equal mean values is violated. This paper pre- 
sents a modified Newman-Keuls procedure which ameliorates the above problem 
without, in the opinion of" the author, becoming unduly conservative. Tables 
are provided which make the new test easy to use. 

METHODOLOGY: Statistics and Stochastic Processes 

ROY E. WELSCH, A Multiple Comparison Procedure Based on Gaps . SSM Working 
Paper 628-72, November 1972. 

This paper presents a multiple comparison procedure that examines first 
the gaps between adjacent ordered sample means, then the three-stretches, 
four-stretches, and so on until the range is reached. This reverses the 
order of most existing multiple comparison procedures. Tables have been 
constructed, using improved Monte Carlo techniques, that make it possible 
to use the new test. 

ROY E. WELSCH, The Variances to Regression Coefficient Estimates Using Ag- 
gregate Data (with Edwin Kuh), SSM Working Paper 616-72, October 1972. 

This paper considers the effect of aggregation on the variance of para- 
meter estimates for a linear regression model with random coefficients and 
an additive error term. Aggregate and micro variances are compared and mea- 
sures of relative efficiency are introduced. Necessary conditions for ef- 
ficient aggregation procedures are obtained form the Theil aggregation 
weights and from measures of synchronization related to the work of Grun- 
feld and Griliches. 


2. Mathematical Optimization 

T.L. MAGNANTI, "A Language for Mathematical Programming," (with G. B. Dantzig 
and S.F. Maier). 

The Mathematical Programming Language (MPL) is a high level programming 
language that uses mathematical notation in an algorithmic structure suitable 
for communicating and testing Mathematical Programming algorithms. The lan- 
guage contains matrix and vector algebra, including partitioned matrices and 
arrays, set like indexing capabilities, and a number of provisions for func- 
tion evaluation. It also provides dynamic storage allocation and Algol-like 
block structures. 

T.L. MAGNANTI, "A Linear Approximation Approach to Duality in Nonlinear Pro- 
gramming. " 

Linear approximation and linear programming duality theory are used 
as unifying tools to develop saddlepoint, Fenchel and local duality theory. 
Among results presented is a new and elementary proof of the necessity and 
sufficiency of the stability condition for saddlepoint duality, an equiva- 
lence between the saddlepoint and Fenchel theories, and nasc for an optimal 
solution of an optimization problem to be a Kuhn-Tucker point. Several of 
the classic "constraint (qualifications" are discussed with respect to this 
last condition. In addition, generalized versions of Fenchel and Rockafel- 
ler duals are introduced. Finally, a shortened proof is given of a result of 
Mangasarian and Fromov/itz that under fairly general conditions an rptimal 
point is also a Fritz John point. 

T.L. MAGNANTI, "A User's Guide to MPL/T.l", (with G.B. Dantzig and S.F. 
Maier) . 

Mathematical Progran^iing Language (MPL) is a high level programming 
language designed for use as a teaching and research tool in Mathematical 
Programming. A subset of the fall language, described here, has been imple- 
mented via a P41 translator. It includes matrix and vector notations as 
well as certain set like indexing capabilities. A working version of the 
simplex method is presented as an illustration. 

T. L. MAGNANTI, "Complementary Bases of a Matroid". 

Let e-,, e^ , e^, e^^ ..., e , e' be the elements of matroid M. Sup- 
pose that {e-, , e^, ..., e } is a bSse of M and that every circuit of M 
contains at least m+1 elements. We prove that there exist at least 2"^ 
bases, called complementary bases, of M with the property that only one of 
each complementary pair ej, e' is contained in any base. 

We also prove an analogotls result for the case where E is partitioned 
into E-j, Ep, ..., E and the initial base contains |E.| - 1 elements from 
partition E .. "^ 

Massachusetts Institute of Technology 

Alfred P. Sloan School of Management 

50 Memorial Drive 

Cambridge, Massachusetts, 02139 

Addendum to: Management Science Group Abstracts 

Date: August 27, 1974 

Due to an inexplicable lapse in an ordinarily 
impeccable administrative system, Jerry Shapiro's abstracts 
were omitted from the Management Science Group Abstracts. 
Corrective pages are attached. 

METHODOLOGY: Mathematical Optimization 

We present here an exact decomposition method for computing penalties 
which makes it possible for most of the columns of a given IP problem to 
be kept in secondary storage and evaluated in a core one at a time. Car- 
ried to the extreme our procedure will, without a branch and bound search, 
reduce the original set of activities to a set of optimal activities for 
the IP problem, and indicate their optimal non-negative integer levels. 
It would appear, however, that the method would best be combined with 
some branch and bound algorithm. 

J.F. SHAPIRO, Constructive Duality in Discrete Optimization , (with 
M.L. Fisher), M.I.T. Sloan School of Management Working Paper No. 
625-72, November, 1972. Also, University of Chicago Center for Math 
Studies in Business and Economics Report No. 7321, April, 1973. 

The purpose of this paper is to consolidate and extend advances in the 
use of mathematical programming duality theory in discrete optimization. 
In particular, meaningful dual problems have been identified for the in- 
teger programming problem, the resource constrained network scheduling 
problem, and the traveling salesman problem. The solution techniques de- 
veloped to exploit the structure of these dual problems are similar and 
may be applied to a general class of discrete optimization problems. 

J.F. SHAPIRO, Computational Experience with a Group Theoretic Integer 
Programming Algorithm , (with G.A. Gorry and W.D. Northup), Mathematical 
Programming , Vol. 4, pp. 171-192, April, 1973. 

This paper gives specific computational details and experience with 
a group theoretic integer programming algorithm. Included among the sub- 
routines are a matrix reduction scheme for obtaining group representations, 
network algorithms for solving group optimization problems, and a branch 
and bound search for finding optimal integer programming solutions. The 
innovative subroutines are shown to be efficient to compute and effective 
in finding good integer programming solutions and providing strong lower 
bounds for the branch and bound search. 


METHODOLOGY: Mathematical Optimization 

T.L. MAGNANTI, On the Number of Latent Subsets of Intersecting Collections , 
(with D.J. Kleitman), OR 012-72, October 1972. 

Given two collections F, and F„ of sets each member of one intersecting 
each member of the other, let the collections of latent sets F- i = 1,2 con- 
sist of the sets that are contained in members of F. but that are themselves 
members of F.. If lower case letters indicate the size of the collections 
we then have 

This result is used to prove that a self-intersecting subfamily F of 
a simplicial complex G having the property that any element of F contains 
s, or Sp can be no larger than the lesser of the number of elements of G 
containing s-, and the number containing s^. Certain extensions and a related 
conjecture of Chvatal are described. 



3. Infomiation Systems 

S.E. MADNICK, Application and Analysis of the Virtual Machine Approach to 
Information System Security and Isolation , (with John J. Donovan). SSM 
Working Paper 648-73, March 1973, and Proceedings of the ACM Workshop on 
Virtual Computer Systems, Harvard University, March 26-27, 1973. 

Security is an important factor if the programs of independent and 
possible malicious users are to coexist on the same computer system. In 
this paper we show that a combined virtual machine monitor/operating system 
(VMM/OS) approach to information system isolation provides substantially 
better software security than a conventional multiprogramming operating 
system approach. This added protection is derived from redundant security 
using independent mechanisms that are inherent in the design of most VMM/OS 

S.E. MADNICK, "Program Parallelism Based upon Computation Schemata" (with 
Hoo-min Toong), Proceedings of the 6th International Congress on Cybernetics, 

In order to attain increased computation, it is often necessary to use 
multi -processor systems. This requires the cooperative asynchronous execu- 
tion of a program. In order to explore the characteristics of such programs, 
a language was developed (based upon the computation schemata approach) that 
accepts elementary data flow graphs along with the corresponding operator 
precedence graph. 

The actual association of particular transformations with operators of 
the schema constitute the interpretation of the schema. This interpretation 
consists of a value set V(m) for each memory cell meM, and for each operator 
a function f: V(m^) X V(m2) X ... X V(mn) ^ V(ni) X V(n2) X ... S V(np) 
where (m-j , m^, ..., m^) aid (n], n2 ..., n ) are the input and output cells 
associated with the operator. ^ 

S.E. MADNICK, Recent Technical Advances in the Computer Industry and Their 
Future Impact , SSM Working Paper 645-73, February 1973. 

This article highlights major advances in the areas of technological 
cost/performance, computer system architecture, and steps toward meeting the 
requirements and capabilities of the user. The decreasing costs coupled with 
increased performance of computer hardware are highlighted. Recent work on 
intelligent data base systems and natural language interaction with the com- 
puter are also explored. 


METHODOLOGY: Information Systems 

S. E. MADNICK, Storage Hierarchy Systems , Project MAC Technical Report 
MAC-TR-107, April 1973. 

The relationship between page size, program behavior, and page fetch 
frequency in storage hierarchy systems is formalized and analyzed. It is 
proven that there exist cyclic program reference patterns that can cause 
page fetch frequency to increase significantly if the page size used is 
decreased (e.g., reduced by half). Furthermore, it is proven in Theorem 
3 that the limit to this increase is a linear function of primary store 
size. Thus, for example, on a typical current-day paging system with a large 
primary store, the numberof page fetches encountered during the execution 
of a program could increase 200-fold if the page size were reduced by half. 

The concept of temporal locality versus spatial locality is postulated 
to explain the relationship between page size and program behavior in actual 
systems. This concept is used to develop a technique called the "tuple- 
coupling" approach. It is proven in Theorem 5 that when used in conjunction 
with conventional hierarchical storage system replacement algorithms, tuple- 
coupling yields the benefits of smaller page sizes without the dangers of 
explosive page fetch activity. 

Consistent with the results above and by generalizing conventional two- 
level storage systems, a design for a general multiple level storage hier- 
archy system is presented. Particular algorithms and implementation tech- 
niques to be used are discussed. 


4. Planning and Control 

J. DERMER, Cognitive Characteristics and the Perceived Importance of Infor- 
mation, SSM Working Paper 618-72, October 1972. 

Recently, several accounting studies have made use of concepts and 
relationships from the field of cognitive psychology. For example, Ijiri, 
Jaedicke and Knight employed the notion of functional fixation to describe 
an individual's adaptiveness to a change in accounting process. Similarly, 
Livingstone referred to learning sets in explaining why some utilities were 
slow in adjusting to accounting changes. In addition, Revsine employed the 
conceptual abstractness construct to speculate on its possible moderating 
effects in an experimental situation, and en its significance with respect 
to information overload. Yet, despite this interest in relationships be- 
tween cognitive factors and information usage, little empirical study has 
been done of the role that cognitive factors may play in accounting. 

Of particular interest to accountants is the possibility that the cog- 
nitive characteristics of an information user may affect his perception of 
what infornetion is important and hence, may affect how information influences 
fiis ultimate behavior. There is considerable support in the psychological 
literature on human information processing for the existence of such relation- 
ships. For example, Schroder et al_ cited three studies of game playing by 
teams whose members differ in their level of conceptual abstractness. Driver 
related the source of the information used in playing a game to the concep- 
tual structures of the team members and found that cognitively simpler sub- 
jects relied more heavily on information handed down by an external authority. 
Similarly, Terhune and Kennedy reported that teams whose members were '-nmolex 
showed more reliance on conceptual information than did simple subject:" .no 
preferred concrete data. Tuckman investigated the amount of inform— .n jsed 
and found that conceptually complex groups were more likely to set^ out in- 
formation whic'i was not i mediately available in their environment than were 
simple groups. Consistent with this result is the finding of Long and Ziller 
that an opsn-minded, non-dogmatic person is likely to seek more information 
than a dogmatic person. Based on these results, it appears that information 
usage is an idiosyncratic or subjectively determined process and that rela- 
tionships are of potential significance to accounting researchers. However, 
because of the psychological research on information processing has been per- 
formed in the laboratory, in a non-administrative context, and using students 
as subjects, the applicability of these results to the situations accountants 
are concerned with is subject to question. 

This paper describes a field study in which the applicability of some 
of these findings to the administrative information system domain was inves- 
tigated. The objective of the study was to determine if the cognitive charac- 
teristics of a manager affect his perceptions of what information is impor- 
tant to performing his job role. 


METHODOLOGY: Planning and Control 

J. DERMER, Differential Effects of Cognitive Complexity on the Organization 
of Management Information . SSM Working Paper 615-72, October 1972. 

Recently there has been extensive research into how individuals process 
information by psychologists (Sieber and Lanzetta, 1964; Karl ins and Lamm, 
1967; Schroder et al_,1967) and management scientists (Bettman, 1971; Howard 
and Morgenrath, 1968; Cravens, 1970). Yet, despite the scope and intensity 
of this general effort, little is known about how managers differ in the 
ways they prefer their information be organized. One characteristic that 
has been successfully used to differentiate several other aspects of an in- 
dividual's information handling is the complexity of his conceptual struc- 
ture (Schroder et al_, 1967). Individuals who are cognitively complex have 
been found to differentiate more aspects of their environment and to track 
information that is not readily available when playing a management game. 
They have also been found to integrate more discrepant information than have 
cognitively simpler subjects (Schroder et^ al_, 1967, Chapter 8). It is 
therefore possible that conceptual structure may also be a determinant of 
how managers prefer their information to be organized and hence may be 
an individual difference of significance to accountants undertaking the de- 
sign of reports for managers. The purpose of this study is to evaluate this 
possibility by examining the relationship of cognitive complexity and infor- 
mation organization. 


5. Other Methodological Research 

M.R. SERTEL, Eruiljbrium Existence Results for Sirnple Economies and 
Dynamic Games , (with Paul R. Kleindorfer) , SSM Working Paper 631-72, 
December 1972. 

The purpose of this paper is to bring some simplicity and generality 
to the investigation of equilibrium existence in certain "simple" dynamic 
games. The way we deal with these objects is, essentially, by reducing 
them to what we term "simple economies", these latter being, from the 
viewpoint of equilibrium existence results, at once more general and less 
cumbersome. In §1, we exhibit some topological facts about a certain rather 
general class of simple economies, including the fact (1.7, Main Theorem) 
that they each possess a non-empty and compact set of equilibria. Then, 
in §2, we define the simple dynamic games of interest, immediately reducing 
them (2.5, Reduction Lemma) to the simple economies studied. In §3, we show 
(3.0) that the simple dynamic games in question have non-empty and compact 
sets of equilibria, using the fact (1.7) that the simple economies to which 
they reduce have such sets of equilibria. We then illustrate by example 
(3.3) that a general class of discrete-timf , deterministic games with convex 
performance criteria is covered by the equilibrium existence results just 
described. This class includes dynamic games for which certain non-linear- 
ities in the next-state map are allowed, and for which controls are restrict- 
ed to compact regions, these regions themselves varying as a function of 
state. Of course, we do not intend that results particularized to this quite 
special example be understood as the main thrust of the paper. 

Historically, the study of the existence of (competitive) general equili- 
brium in economies exhibits quite a long-standing and extensive literature. 
A crucial turning point in that literature is afforded by the Arrow and Debreu 
[1954] study, benefiting from Debreu' s [1952] earlier investigation and using 
a FPT (fixed point theorem) of Eilenberg and Montgomery [1946]. This work is 
generalized in [Sertel , 1971] by use of the more powerful FPT's of [Prakash 
and Sertel, 1971]. Essentially, our present results can easily be demonstrat- 
ed as corollaries to this last mentioned, but owing to the relative inacces- 
sibility of both this work and the fixed point theory it employs, we restrict 
ourselves here to what can be done by using the relatively well-known FPT of 
Fan [1952] which [Prakash and Sertel, 1970] generalizes. Even with these 
handicaps, our main theorem generalizes the Arrow and Debreu [1954] equili- 
brium existence result. 

We work in locally convex spaces. Such spaces include normed spaces 
and the conjugate space of the Banach space of all real -valued continuous 
functions on a given compact space. This conjugate space, in turn, is the 
natural habitat of probability measures under the weak (or w*) topology 
(see Parthasarathy [1967]). Our working in locally convex spaces is moti- 
vated by the hope and conjecture that equilibrium existence results for sto- 
chastic dynamic games may also be obtained by reducing them to the simple 
economies introduced here. 


METHODOLOGY: Other Methodological Research 

M.R. SERTEL, The Fundamental Continuity Theory of Optimization on a Compact 
Space I . SSM Working Paper 629-72, November 1972. 

Optimizers on a compact feasible region are abstractly specified and, 
as set-valued mappings, are studied for sufficient conditions yielding them 
(as well as certain associated maps and certain restrictions of all these) 
continuous, using function space methods. In particular, the study concerns 
the continuity of the set of optimal solutions as a function of the three 
arguments: (i) objective function used, (ii) an incentive (or "penalty/ 
reward") function imposed, and (iii) an abstract "parameter". An interpre- 
tation of the mathematical apparatus is suggested and a brief game-theoretic 
illustration given. 


Abstracts of Theses 

Supervised by Faculty of the 
Management Science Group 

1972 - 73 











Management Science continues to be plagued by a lack of generalized 
models for management information systems. We have models for other com- 
puterized functions: compilers, assemblers, and operating systems; but we 
have no generalized model for information systems. 

This paper takes one information system, Janus, developed at the 
Cambridge Project at MIT, and using it as a prototype, adds certain 
features to create a more powerful, sophisticated information manager. 
The paper finishes with a revised model of Janus and extrapolates from 
this to propose a model for a generalized information system. 

The paper concludes acknowledging the trade-offs between speed and 
efficiency on the one hand and power and flexibility on the other, but 
offers documentation that the trade-offs can be reasonably successfully 
managed for the general case. 

Thesis Supervisor: Stuart E. Madnick 

Title: Associate Professor of Management 




Yvan Allaire 

Submitted to the Alfred P. Sloan School of 
Managenent on August 23, 1973, in partial 
fulfillment of the requirements for the de- 
gree of Doctor of Philosophy 


The focus of this research is the quite simple notion that 
a person's affective response to an object is some function of 
the cognitive, or perceptual, structure harbored by that person 
for thflt category of objects. 

The objective of the thesis is to propose and test a metho- 
dology for the measurement of all elements in this process (per- 
ceptual structure, affective response and the functional rela- 
tionship between the latter and the former) in the context of 
choice among social objects. A critical examination of the 
theox'-etical and empirical foundations of the semantic diffe- 
rential, multidimensional scaling of similarity judgments and 
Kelly's role r-epertory test led to the articulation of a set of 
premises fcr a measurement methodology: 

1. The pertinent lexicon and repertoire of constructs 
for a particular class of stimuli should be ob- 
tained by the systematic tapping of the constructs 
used by a sample of subjects drawn from Che tar- 
get popu lat ion . 

2. People may vary as to which constructs constitute 
markers for a particular dimension. This occur- 
rence has; been termed heterogeneity of semantic 
structui-es . 

3. Measurement should be limited to the stimuli which 
are familiar to a subject (stimuli which are part 
of their relevant set). 

4. People may vary as to the position they assign to 
the various stimuli on the dimensions underlying 
their pex-ception. This has been termed hetero- 
geneity of perceptual structures. 

The examination of the preference models used in 
different research areas led to the articulation 
of a fifth premise: 


5. A set of plausible preference models should be 
evaluated to determine which one may represent 
the best linkage of perception to preferences 
in a particular context. 

A methodology consistent with these premises is proposed 
and tested on the choice process for brands of beer in a sample 
of French Canadian college students. The results indicate that 
the methodology provides sensitive measures of perception, pre- 
ference and the linkage between them. 

The extensive tests carried out support most of the pre- 
mises of this methodology. Specifically, the following main 
conclusions were reached: 

- Constructs obtained from subjects are substantially dif- 
ferent from those obtained from managers and provide a somewhat 
better fit to preference data. 

- The evaluation of brands in subjects' relevant sets is 
based upon a semantic structure of higher dimensionality than 
the evaluation of brands not in subjects' relevant sets. 

- There is evidence of systematic variation in the pattern 
of inter-construct correlations among the groups identified as 
harboring different semantic structures. However, these diffe- 
rences are not statistically significant nor does heterogeneity 
of semantic structures have a significant impact on the good- 
ness of fit of preference models. 

- The measurement of semantic structures by a direct method 
leads to results substantially at variance with those obtained 
with an indirect method (the factor analysis of correlations 
between constructs). 

- A global test of the impact on the goodness of fit of 
preference models of the various sources of heterogeneity con- 
sidered in this research indicate that whether the estimation 
is done for each subject or for a whole group of subjects is of 
major importance. Heterogeneity of perceptual structures has 
the next largest impact followed by preference models. Overall, 
the best preference model turns out to be the quadratic model. 

- There are substantial inter-subject variations as to 
which model provides the best fit to preference data. 

Thesis Supervisor: Alvin J. Silk 

Title: Associate Professor of Management 




Ilyas Bayar 

Submitted to the Alfred P. Sloan School of Management on January 19,1973 
In partial fulfillment of the requirements for the degree of Master of 


This paper develops alternative models to analyze the response of 
the ethical drug market to a communication mix. Of special interest are 
the carry-over effects observed in the resoonse over time of market share 
to the different communication mix items. 'Jon-linear distributed lag 
models using 2nd and 3rd order Pascal probability distributions to 
impose a specific structure on the data are developed and aoplied. 

Thesis Supervisor: 

Alvin J. Silk 
Associate Professor of 
Management Science 




Thomas Delp Blount 

Submitted to the Alfred P. Sloan School of Management and the Department 
of Mechanical Engineering in August 1973, in partial fulfillment of the 
requirements for the degrees of Master of Science in Management and 
Master of Science in Mechanical Engineering. 


The aim of this thesis is to discuss the design and development of 
a man-machine decision system (MMDS) which is intended to aid members of 
middle management in analyzing and examining alternative production 
schedules. The MMDS developed is used weekly by production controllers 
in dGtarmining the mix and amounts of piecework production which are to 
be scheduled for the multiple factories of a Boston-based shoe company. 
Issues in MMDS design taken from a literature survey are presented, 
followed by a suggested design methodology. The methodology is a model- 
based decision-centered approach consisting principally of the develop- 
iTient of three models — a normative model of the decision task, a 
descriptive model of the decision environment and task, and a functional 
model based on the noted differences between the nomiative and descrip- 
tive models. 

A MMDS is defined as a system made up of three interacting 
components: a decision maker, an interactive computer system, and a 
decision task. This is meant to include only those computer support 
systems which are highly interactive and are designed to aid with 
relatively complex and unstructured decisions. 

The issues in MMDS design involve many diverse disciplines, and no 
concise body of MMDS theory currently exists. The design methodology 
suggested is partly based upon a literature survey of the several 
disciplines directly impacting MMDS design. The methodology is applied 
to the design of a MMDS for a production scheduling problem. 

The problem is a quite comolex and unstructured one, involving 
scheduling of shoe patterns in multiple factories over varying production 
times. Each factory employs up to 1000 semi -ski IT;:;' crafcs which work 
on a piece-rate basis. The MMDS seeks to aid middle managers m their 
determination of the final production schedule, basad upon the projected 
labor requirements in all crafts for each factory, A descriptiori of the 
MMDS is presented along with examples of system use. 


The general results from the design and use of the system suggest: 
(1) that the decision-centered design methodology is appropriate for 
MMDS, (2) that Mf-IDS can be successfully designed to aid middle managers 
In complex and unstructured problem areas, and (3) that MMDS provide a 
new and powerful means for bringing the computer directly to impact 
management in solving heretofore non-computerized problems. 

Thesis Supervisors: David Ness Thomas Sheridan 

Titles: Associate Professor Professor of 

of Management Mechanical Engineering 







Svibinitted to the Alfred P. Sloan School of Management on January 24, 1973 
in partial fulfillrr.ent of the reqmrements for the degree of Master of 
Science in Manageinent. 


A- management information system for use in the Production Department 
of a Naval Shipyard has been developed using the model-based decision- 
oriented systems design approach of Rockart, Gerrity and others. The 
Boston Naval Shipyard, Charlestovm, Massachusetts, v;as used for the descrip- 
tive model. Vfhere possible, the existing standard shipyard MIS was retained 
and included in the design. 

The management information system design process has been broken down 
into three discrete "^egm.ents: 

a. Systems analysis--constructicn of normative and descriptive 

b. Determination of system requirements--comparison of the 
normative and descriptive models to determine system requirements. 

c. System developm.ent--development of a system to accomplish 
the requirements developed above. 

After a brief shipyard orientation period, construction of the norma- 
tive model was begun. For the descriptive model, three levels of managem.enx 
within the Production Departm.ent of the Boston !Iaval Shipyard were observed: 
foremen (first-line supervisors), the Repair Officer, and the Production Of- 
ficer (department head). The observation period consisted of approximately 
one and a half months of close, daily contact with the managers involved. 
The decisions of these m.anagers and information relating to them were re- 
corded and later analyzed and categorized. After comparison of the norma- 
tive and descriptive models to determine the information system i-equire- 
ments to support the decision categories for the managers, an MIS was 
designed to satisfy* these requirements. 

The authors have demonstrated the usefulness of the m.odel-based , de- 
cision-oriented approach applied to the shipyard job shop environment, have 
proposed significant changes to the system currently in use in the naval 
shipyards, and recomm.end that potential application areas for the model- 
based, decision-oriented approach (i.e., other than job shop) be investi- 

Thesis Supervisor: John F. Rockart 

Title: Associate Prcfesscr of Management 



3y George J. Canuichael III 

Submitted to the Alfred P. Sloan School of Maregement 

on October 15, 1972, in partial fulfillment 

of the requiremenv;.-: for the deg^^ee of 

Master of Sciei.;:e in Management 


An examination is made of a'counting practices related to recog- 
nition of periodic income in the retail land development industry. 
Reasonable and meaningful conclusions have been reached, and the pro- 
posols are given concerning alternative accounting policies for the 
recognition of income. Careful : tudy was undertaken of the indistry's 
historical background and the nature of its varied business activities, 
Theoretical analyses of the criteria for income recognition also con- 
tributed to the conclusions reached. 

It is appropriate in the retail land development industry to 
postpone recognition of recorded revenues because of fucui-e de/elop- 
ment obligations and financing services associated with long-term 
installment contracts. This is the most reasonable method pre- 
senting periodic income under the special circumstances within this 
industry . 

A portion of net sales revenues should be deferred for proper 
recognition in the future as inprovements are made and the earning 
process is completed. Valuation discounting to present value of 
long-term installment contract receivables is appropriate under 
Opinion No. 21 of the Accounting Principles Board. The discount is 
then amortized as interest income over the term of the contract 

Thesis Supervisor: John F. Rockart 

Title: Associate Professor of Management 





Richard A. Chesney 

Submitted to the Alfred P. Sloan School 
on May 11, 1973 in partial fulfillment 
of the requirements for the degree of 
Master of Science of Management. 

More and more corporations are coming under increased pressure 
to respond to social issues. Since they are inexperienced, their 
responses will go through some sort of evolution as they learn more 
about the problem. This thesis tries to study that process in order 
to gain insight into the difficulty of managing corporate social 
responsibility. To fully understand the problem, a case study is 
the most appropriate form of investigation, and chosen for study 
was First Pennsylvania Banking and Trust Company, now the major 
subsidiary of First Pennsylvania Corporation. 

Through a series of interviews with numerous key individuals 
in the bank and from a search of various publications, it was 
possible to study the different corporate responses to social 
Issues individually. From this investigation, the impact of social 
issues was intently observed. It was felt on two levels in the 
bank - in the way it does business and in the way it organizes to 
do business. 

This breakdown also distinguishes between the limited range of 
applicability of First Pennsylvania's functional experience to banks 
and the broader scope of its organizational experience to ali corpor- 
ations. On an operational level, the lessons were twofold. "^ /rsK, 
the bank must sensitize its employees to the problems of dealing 
with Blacks as employees and as customers. Second, the bank must 
re-evaluate its operating procedures such as personnel standards, 
credit criteria, and repayment schedules, to accommodate the Blacks. 
For managing social responsibility in general, there are three manage- 
ment issues which are essential: information, organization, and 
evaluation. Social Involvement will increase the informational 
needs of the organization. The organizational mechanism which will 
manage this involvement will vary in size according to the degree of 


involvenenc on the particular Issue. As currently designed, most 
firms' managensent svster.s are not able to handle social involvement. 
Changes are needed in the goal setting process, the performance 
evaluation, and the revard systen. From these general conclusions, 
guidelines were developed to help other corporations get socially 
involved . 

Thesis Supervisor: Gordon F. Bloora 

Title: Senior Lecturer of Management 





B.A. , University of Colorado 

The management function in Massachusetts 
public higher education is accomplished 
through negotiation, bargaining, and com- 
promise among the participants. The 
substance of management is a series of 
policy statements issued by the various 
participants, either singly or in unison, j 
o'lrar time. This paper, first, looks in 
depth at the various structures and 
functions within higher education to 
determine the critical decision-making 
bodies* The various activities are 
slassified. Then, the system is vievred 
in the dynamics of a policy process. A new 
mechanism for problem resolution is iden- 

This paper relies most heavily on lay own 
observations supplemented by the insights 
of several system participants, A cora=. 
bination of various theories provided the 
framework to which these observations 
cling; finally, documents filled in missing 

Thesis. Supervisor: John F, Rockart 
Title: Associate Professor 

of Management 



Jeffrey L. Cooper 

Submitted to the Aired P. Sloan School of Management on May 11, 1973 
in partial fulfillment of the requirements for the degree of Master 
of Science. 


Many Americans are unable to move about as freely as they wish. 
They suffer some degree of mobility impairment due to a variety of 
causes - ranging from severe spinal cord injury to simply "old age". 
As a result of these mobility limitations, conventional housing becomes 
unsuitable for these persons. Stairways become barriers. Storage 
space becomes inaccessible. Kitchens become hazardous to use, and 
bathrooms sometimes become unusable. Consequently these persons are 
in dire need of housing \vhich responds to them in a more human way; 
housing which accomodates their particular disabilities. 

This is adaptive housing. 

The design of adaptive housing is itself an :^nfant field. The 
marketing of adaptive housing is virtually unprobed. 

This study, as an initial one in the marketing area, attempts 
firstly to explore the size A^nd nature of the disabled market. 
Secondly, it tries to develop techniques for establishing comnunication 
and distribution chann els v/ith the market. Lastly, it explores the 
availability of funds to the market. 

The conclusions reached by the study were the following: 

1) Firstly, the disabled market is largely a segmented and in- 
accessible one. Conventional means of coinmunication, sales and dis- 
tribution V7ill simply not work for them. A successful marketing system 
will have to establish intermediary liaisons with the market through 
the medical professionals in the field of rehabilitation, as well as 
f"brr>nf>h tho oxi?^i^° or **snizat ions of the handicapped. 

2) The disabled market is a predominantly low income market. 
At the same time, the products developed for it being prototypical, 
are costly. This disparity will necessitate the extensive use of 
third party funding. 


3) The availability of third party funding will depend in part 
upon the acceptance of a new definition of "Rehabilitation". This new 
concept will entail the total self adjustment of the disabled person 
to the daily activities of the home and community environment. 

Thesis Supervisor: John U. Farley 

Title: Visiting Professor 




Raymond F. Coulombe 

Submitted to the Alfred P. Sloan School of Management 

on Kay 11, 1973 

•In partial fulfillment of the requirements for the 

degree of Master of Science. 


It is being argued with Increasing vigor by the authori- 
ties of the Port of Boston that the introduction and develop- 
ment of the concept of containerizatlon has been the salvation 
for this port of decreasing prominence. The purpose of this 
thesis is to examine this contention in light of the histori- 
cal development of the container facilities of the major East 
Coast container ports. 

A brief introduction to the concept of containerizatlon 
itself is first presented. The process of containerizatlon 
is explained, a sample of containerizable commodities listed, 
and typical grov;th patterns of containerized tonnage for se- 
lected ports Illustrated. 

The growth of container facilities for the major East 
Coast ports, New York, Boston, Halifax, Hampton Roads, Balti- 
more, and Philadelphia, is then considered. After a summary 
of annual additions to facilities of these ports, in terms 
of number of cranes and of linear feet of berth space, the 
growth of annual containerized tonnage for these ports is 
examined. Three phases of growth are identified; these are 
initial growth, rapid intermediate growth, and steady-state 

For the ports of Boston, Halifax, Hampton Roads, and 
Philadelphia, a regression analysis is conducted to explore 
the first two phases of container growth. Area berth space 
excluding that in the port being studied (net area space) 
was found to be significant in a nulti-variate regression also 
including port berrn space and GH? fox" all ports except Hamp- 
ton Roads. GNP was significant for Hampton Roads and for 
Philadelphia. (Significance was at the l,o level.) It is hy- 
pothesized that an avjareness factor, i.e., manufacturer a- 
wareness of the desirability of shipping containerized, in- 
creases with the development of container facilities, promp- 
ting an Increase in annual containerized tonnage. 


A transportation model for the third phase is proposed 
for the purpose of providing a basis for further study of this 
phase as it unfolds. 

It is concluded that the Port of Boston, although late 
in the development of its container facilities, made a ba- 
sically sound decision in initiating these facllitip^P. How- 
ever., it must carefully assess the future demands to be placed 
upon these facilities in order to Insure sufficient capacity 
to meet these demands. In addition, it must strive to make 
the port more attractive to shippers and manufacturers alike. 

Thesis Supervisor: Thomas L. Magnanti 

Title: Assistant Professor of Management 


Jacques Charles Cremer 

Submitted to the Alfred P. Sloan School of Management in June, 1973 in 
partial fulfillment of the requirements for the degree of Master of 


For a number of years the Health Maintenance organizations have been 
considered in the U.S. as part of the solution of the "health care crisis." 
This thesis examines the opportunities for development of such organiza- 
tions in France. It studies their potential impact both on the financial 
and medical performance of the French health system. 

After two chapters describing respectively the French health system 
and the American H.M.O.s a model is proposed to explain the inflation in the 
cost of medicine in France. This model also provides insights on the deter- 
minants of the quality of care. 

H.M.O.s are then introduced in this model. It is possible to derive 
some requirements they must meet and to determine what their impact coxild 

This analysis leads to the conclusion that experiments should be conducted 
in veil-selected ccrmunities. 

Thesis Supervisor: Leon S. White 
Title: Senior Lecturer 

"^3" Prekpsh Dehanuker 


The concept of offshore manufacture of electronic 
components by American companies so as to save on labour 
costs has been prevalent since early fifties. The first 
half of this thesis is a general background which des- 
cribes the extent of offshore manufacture, most favoured 
locations for foreign operations and India's attempts 
to establish a free trade zone to attract foreign com- 
panies. The advantages inherent in setting up a facility 
in the new Santa Cruz Free Trade Zone, Bombay and the 
incentives offered by the Indian Government have been 

The second half of the thesis is a case study of 
the author's attempts to seek a joint venture with an 
American company in the Santa Cruz Free Trade Zone. The 
criteria for identifying the ideal products and the ideal 
joint venture partner have been discussed in detail. The 
negotiations between Circuits Inc., a Boston based manu- 
facturer of printed circuits, and the author v/hich resulted 
in an agreement to set up a joint venture in the Santa 
Cruz Free Trade Zone, have been discussed in the last two 
chapters of the thesis. Based on the author's limited 
experience, recommendations are made which could perhaps 
make the process of seeking such a joint venture easier 
in the futui-u. 




Jerry D. Davis 

Submitted to the Alfred P. Sloan School of Management on 
May 11, 1973 in partial fulfillment of the requirements 
for the Degree of Master of Science. 


Relative to a specific company's characteristics, 
this paper attempts to clearly define and understand the 
inter-workings and attitudes of both the foreign and 
domestic steel suppliers. It further conducts an actual 
cost-benefit analysis for the year 1972 concerning the 
specific company Involved. Written and verbal communi- 
cations with tx-zo domestic suppliers and two foreign 
suppliers coupled with actual data taken from the company 
itself provide almost all the source information. 

It was concluded that the company Involved saved a 
substantial amount of money by buying foreign steel in 
1972. It was further observed that early in 1973 certain 
events (devaluations, world-wide peak demands, etc.) 
would certainly disrupt the environment in which this 
particular company was accustomed to. 

Thesis Supervisor: Arnaldo C. Hax 

Title: Associate Professor of Management Science 


Trends in the Foodservice Industry 


Noel Ellis Dill 

Submitted to the Alfred P. Sloan School of Management 

on January 24, 1973 
in partial fulfillment of the requirements for the 
degree of Master of Science 

This thesis was a study of the available statistical data relating 
to the Foodservice Industry in the U.S. The purpose was to examine this 
information in an effort to identify the recent historical trends which 
have affected this industry, and having done so, to analyse and compare 
these trends with the perceptions of managers in the field. Further, the 
reactions and future plans of these managers were evaluated. 

The information discussed was gathered from two sources: association 
newsletters, government publications, and other industry reports were util- 
ized for the initial trend identification, and interviews with ten managers 
of large, quality restaurants in the Boston, Massachusetts area were the 
source of the perceptions discussed in the final section. 

The study showed two major trends in the industry: There are increas- 
ingly frequent tendencies toward the establishment of chains and other 
large scale foodservice operations, and the foodservice itself is moving 
in the direction of fast food and fast service operations. 

Generally, the foodservice industry is beset by labor problems and 
a lack of technology. There is very little research of substantial import 
being done. The efforts of improvement by managers are directed toward 
the margin of existing concepts, with little or no innovation. 

Thesis Supervisor: Gordon F. Bloom 

Title: Senior Lecturer of Management Science 

Alfred P. Sloan School of Management 



Our nation faces a serious shortage of public recreational opportun- 
ities along the coastal shoreline. This shortage has naterialized as a mush- 
rooming demand for the unique and relatively scarce resources of the coastal 
environment has far outstripped the effective supply. A pattern of economic 
growth and private development in coastal areas has continued unchecked for 
the past tliree hundred years, so that now we find only a small percentage of 
the entire shoreline in public hands for recreation. Furthermore, the prob- 
lem is compounded by pollution, erosion, and the increasing tendency of pri- 
vate owners to restrict access in areas traditionally available for public 
use. But while the supply is limited, the demands increase at a breakneck 
pace. The multiplicative effects of increasing population, income, leisure 
time, and mobility are expected to bring about a tripling in the demand for 
outdoor recreation by the turn of the century. Yet the facilities, especially 
those involving water-oriented activities, are saturated now with hordes of 

The source of the shoreline recreational problem lies in the insti- 
tutional mechanisms that historically have been relied on to allocate scarce 
resources amon competing uses. This "allocative system" consists of the com- 
petitive private market and local governmental units, both of which, under 
certain circumstances, can be shown to under-represent certain important 
social values while over-reoresentine others. Thp r:iT-riiTnRfairp<5 loarlinc t-r> 
allocative imperfection include: (1) the inability of the price system to de- 
termine and articulate the true costs and benefits to society associated with 
the use of common-property resources; and (2) the tendency of municipal of- 
ficials to make decisions governing the use of resources of more-than-local 
significance solely on the basis of local needs and values. In sum, the his- 
torical organization of economic and political activity gives rise to system- 
atic forces which, if left unadjusted, tend to misallocate resources on a 
large scale. This is what has happened in the coastal shoreline: public 
beaches and recreational open spaces have not been sufficiently provided while 
private development has soared; water qualtiy has not been maintained as in- 
dustrial and municipal wastes have made sewers out of most estuaries; and 
many ecologically-important wetlands have not been protected from indiscriminate 
dredging and filling. At the same time, governmental action at higher levels 
has frequently been a classic case of too little and too late. 

Recent legislation at the federal level expresses concern over the 
coastal resource situation — including the problem of decreasing open-space 

for public recreational use and encourages the states to develop management 

programs to make wise use of coastal lands and waters. The search for manage- 
able solutions to the shoreline recreation component of this broad mandate 
must begin with an analysis of the legal regimes governing public vs. private 
rights in seashore areas. As it turns out, public recreational rights in the 
waters, tidelands, and submerged lands of most coastal states are relatively 
firmly established. The larger part of the problem of public rights stems 
from private ownership of littoral property in upland areas, above the line 
of mean high tide. Since the shoreline cannot be effective as a complete 


(abstract continued) 

recreational resource without the availability of uplands held by shorefront 
proprietors, any discussion of public use must focus on the legal principles 
applicable to this portion of the seashore. 

In recent years, progressive courts in a few states have employed 
a variety of common-law doctrines to confirm public recreational rights both 
in private and municipal areas traditionally open to use by the public at 
large, l^ile ludicial activity has played a significant role in calling at- 
tention to the recreation problem and stimulating legislative response, it 
cannot be relied on as an effective tool of public policy in the long run. 
The major difficulty is that reliance on judicial determination of the public 
.Interest on a case-by-case and jurisdiction-by-jurisdiction basis interjects 
enormous uncertainty into what should be a coherent and orderly planning pro- 
cess. Striking a balance among public recreation, private recreation, con- 
servation, and other uses of the coastal shoreline is a management problem 
and as such is the proper domain of the legislatures and their duly-author- 
ized administrative agents. 

Since a beach is essentially an open space and a public beach a pub- 
lic park, the legal tools available in the formation of public policy are 
basically those which have been applied in the areas of open-space and recre- 
ational planning. The meet direct and frequently "sed metboH of spmrinp shore- 
line areas tor puDiic use is co ouy chem, eitiier Lltrough putuuaoc ui i.unvlcm- 
nation of the fee simple or an easement. While government acquisition pro- 
grams are the most desirable means of providing recreation facilities in the 
long-run, there is a need to apply more flexible legal mechanisms to preserve 
the open-space character of the shoreline in the short-run. If beaches and 
other prime recreational shorelands currently under private ownership are ever 
to be "reclaimed" for public use, they will have to be regulated so as to pre- 
vent construction on at least that portion of the beach most appropriate for 
public use, i.e. the dry sand area between the water's edge and the line of 
vegetation. Having examined the constitutional limitations of the regulatory 
power with respect to open space objectives, it seems clear that a number of 
land-use controls can be utilized in the shoreline situation. Exclusive-use 
zoning, setback lines and official mapping, subdivision exactions, compensable 
regulation, and tax techniques are all potentially effective means of pre- 
serving the seashore as a unique open-space resource; and carefully-drafted 
ordinances regulating seashore use stand a good chance of weathering constitu- 
tional storms with regards the issue of taking withou due procass of law. 

Decreasing open space for public recreational use is prototypical 
of the complexity of coastal resource management issues. This report isolates 
the economic and political causes of the problem and evaluates the legal tech- 
niques available to carry out public policies that are designed to solve it. 
But the process of making equitable and efficient choices among policy alter- 
natives entails consideration of a wider range of practical decision-making 
issues, which are outlined and then consigned to future efforts. 


James J. Findley 

Submitted to the Alfred P. Sloan School of Mana-^ement on June I9, I973 in 
partial falfillnent of the requirements for the degree of Ifester of Science. 


This thesis is an evaluation of the potential and the record of pre- 
paid dental care as a means of increasing the utilization, insuring the 
quality and controlling the cost of dental care. 

Most people need to '/isit their dentist once a year to maintain their 
oral health. Yet, in a given year, less than half of the population goes 
to a dentist and a much smaller fraction follovs a program of regular care. 
People vho do go to the dentist find that the cost of dentist rj^ is rising 
faster than the cost of most other services, and, in some cases, that the 
care they receive is not adequate. 

All dental prepayment mechanisms stimulate utilization by reducing or 
eliminating the cost barrier to the indixddual. Furthermore, as a nevr 
force bet-;een patient and dentist, they have the potential to promote the 
utilization of dental care and to affect the quality and cost of the care 
that is given. Hovever, they also create forces against the desired 
utilization, quality and cost of care. 

A large part of this thesis is devoted to the development and applica- 
tion of standards to measure how veil existing dental plans have lived up 
to their expectations. Overall, the available data indicates that they 
have indeed had a positive irroact on the utilization, quality, and cost of 
care, but that this icrpact is limited in scope and is very much a function 
of the effectiveness of the plan's organization and implementation. 

Thesis Supervisor: Glen L. Urban 

Title: Associate Professor of 
Management . 



Charles P. Fletcher 

Submitted to the Alfred P. Sloan School of Management on May 11, 1973 in 
partial fulfillment of the requirements for the degree of Master of 
Science in Management. 


The capital budgeting decision is one of the most challenging prob- 
lems faced by top management of large corporations. This is particularly 
true within the context of capital-intense primary industry. This thesis 
examines the nature of the capital budgeting process within the Aluminum 
Company of America. It describes the nature of the prevailing investment 
climate and identifies some of the specific constraints that are imposed. 

The mechanism of preparing the capital budget is outlined which leads 
into an examination of the process for evaluating alternate investment 
proposals. This thesis does not deal with the problem of portfolio selec- 
tion or the comparison of independent proposals. It concentrates instead 
on the evaluation of an individual proposal. 

The evaluation involves a detailed description and analysis of an 
existing Alcoa risk analysis program. This is a comprehensive computer 
operated Monte Carlo simulation which recognizes the stochastic nature of 
relevant sales, cost, and investment data. The operation and sensitivity 
of the model are demonstrated by a hypothetical example concerning equip- 
ment investment. 

The outputs of the model are then evaluated and compared to current 
practice as described in relevant literature. The model operation and 
analysis highlights the problems associated with rules of thumb such as 
payback period, return on capital employed, and internal rate of return. 

The thesis concludes that quantitative analytical analysis is an 
essential tool for decision making managers, but that intelligent applica- 
tion demands a thorough knowledge of the operation of the model. 

Thesis Supervisor: Arnoldo Hax 

Title: Associate Professor 





John Robert Gehaan , Jr. 

Submitted to the Alfred P. Sloan School of Manapement on May 11, 1973 
in partial fulfillment of the retjuirenents for the degree of Master of 
Science in Management. 


The United States Air Force has developed a systematic approach to 
the management of systems acquisitions known as the 375 Series of Manuals, 
This thesis examines four Air Force systems (1*73L, ^i6M, 1»07L, i^d 1*85L) 
to determine the effectiveness of these guidelines as applied to computer 
programs. The first three systems have been completed, while the fourth 
is an on-going program. 

The relative success of any computer program system development is 
thfught to depend to some degree on the nature of the management approach 
adopted. Each of the four systems vaa examined in terms of the following 
vp-riables: extent of success, organizational structure, personnel selec- 
tions, estimating procedures, type of contract, contractor reporting and 
control system, system design approach, specification development, 
testing, milestones, design reviews, maintenance/modification philosophy, 
and installation and turnover. 

This study demonstrated that proper, conscientious application of 
the 375 Series guidelines for Air Force Systems Management should result 
in a greater degree of success in the acquisition of computer programs. 
Experience with the systems studied indicates that special attention 
8ho\ild be focused on systems engineering, configvuration management, and 
the logical progression of events (milestones) in the system life cycle 

Tbesis Supervisor: Malcolm M, Jones 

Title: Assistant Professor of Management 




Mark Gilmaai 

Submitted to the Alfred P. Sloan School of Management on May 
11, 1973 in partial fulfillment of the requirements for the 
degree of Master of Science. 

The objective of this thesis is to provide an evaluation 
of the effectiveness of- real estate limited partnerships as a 
vehicle for channeling equity capital into real estate. After 
an initial discussion of the basic structure of limited part- 
nerships, the subsecuent analysis attempts to identify those 
features in various types of partnerships which are relevant 
in determining their respective investment characteristics^ 
This will provide the necessary basis for approaching the issue 
of whether there is a segment of the investment community for 
which limited partnership shares represents an efficient invest- 
ment. Establishing the fact that there is a sufficiently deep 
market for these securities is an essential component of the 
overall task, V/ithout such evidence, it would be unrealistic 
to conclude that limited partnerships represent an effective 
vehicle for channeling equity capital into real estate^ 

While the first half of this thesis is primarily concerned 
with limited partnerships from an investor's viewpoint, the 
latter sections focus on the status of the general partner^ 
Clearly, since it is the general partner who initia.tes ' the 
formation of limited partnerships, and thereafter manages 
partnership affairs, the arrangement must also be attractive 
from his viewpoint. This is to say that a potential general 
partner must be able to satisfy his financial objectives through 
the formation of a limited partnership. Thus, the latter por- 
tion of the analysis concentrates primarily on identifying 
those areas in which the general partner can improve his risk/ 
retiirn posture by employing this vehicle. 

The completion of the aforementioned analysis then enables 
one to ascertain the level of effectiveness of real estate 
limited partnerships in drawing equity capital into real estate. 


Thesis Supervisor: Gordon Bloom 

Title: Senior Lecturer, Sloan School of I'anagenent 




Marshall Barrett Goldman 

Submitted in partial fulfillment to the 

Alfred P. Sloan School of Management on June 22, 1973 


The Learning Style Inventory was used to collect data on 
learning styles of seniors at MIT. Undergraduate major 
mean learning styles were found to correspond to predicted 
learning requirements. When the learning styles of careers 
were compared, this distribution fitted the predicted dis- 
tribution. The choice of Mathematics as a career correla- 
ted significantly with above mean abstract Learning Style 
Inventory Score. 




John O. Grettenberger 

Submitted to the Alfred P. Sloan School of Management on 
MeLTch 1, 1973 in partial fulfillment of the requirements 
for the degree of Master of Science. 


A major problem faced by auto manufacturers today is the main- 
tenance of well capitalized, well housed, and well staffed dealer- 
ships operated by individuals experienced in automobile retailing. 
With escalating capital requirements , the need for prime real 
estate locations and sophisticated service equipment, it has 
become increasingly difficult to secure qualified dealer candi- 
dates with the required financial support. 

The purpose of this study is to examine sources of capital for 
dealership financing not currently being utilized by auto manu- 
facturers, with particular emphasis on chain investment by exis- 
ting dealers. The hypothesis tested is that due to a lack of 
understanding and clearly defined policy, auto manufacturers 
and potential investors among the body of current retail dealers 
are not making maximum use of capital resources at their dis- 
posal. In hopes that a better utilization of capital resources 
will result, this study critically analyzes the requirements of 
the manufacturer and investor with regard to both the opportuni- 
ties presented and the controls required. 

The research methodology consisted of a review of published 
literature on the svibject coupled with a series of personal 
interviews with key individuals at General Motors Corporation, 
its five car divisions, field management personnel, and retail 
auto dealers with an interest in chain investment. 

The study revealed that chain investment by existing dealers 
can be a healthy means of securing capital for new and expanded 
dealership operations provided that the requirements of both the 
manufacturer and investor are considered in policy implementation. 
Changes in manufacturer attitude towards chain investment, their 
current policy, and administrative procedures are essential, 
however, before expansion of chain investment tcJces place. 

Thesis Supervisor: Gordon F. Bloom 

Title: Professor of Management 



Alexandre J. Gros 

Submitted to the Alfred P. Sloan School of Management on June 11, 1973, 
in partial fulfillment of the requirements for the degree of Master of 
Science in Management. 


It would appear that a considerable fraction of first-time blood 
donors do not continue to donate regularly. A deeper understanding of this 
phenomenon is a prerequisite to evaluating the cost/effectiveness of 
directing efforts towards increasing the flow of first- time blood donors 
as opposed to improving the retention of former donors. 

We have developed a methodology and undertaken a small pilot study 
for learning about the factors which dispose or inhibit people towards 
blood donation. Our emphasis is on the development of a workable methodo- 
logy for learning about the decision processes of first-time blood donors. 
This thesis focuses upon the study of (1) the reactions of these donors 
to their initial blood doning experience and of (2) their present attitudes 
towards giving blood. After choosing a possible conceptual framework from 
the literature of Social Research to develop a 72 item questionnaire, a 
survey was conducted by means of face-to-face interviews with a sample of 
48 recent first-time donors in Newton, Massachusetts. 

Our primary conclusions are methodological. We provide a framework 
for structuring our survey instrument and for analyzing responses to it. 
We suggest improvements in the instrument, discuss general interviewee 
reactions to the administration of the questionnaire, and suggest future 
alternatives for furthering this research on a broader scale. 

However, some dominant properties of the responses may be noted 
here, keeping in mind the small sample and the pilot nature of this study. 
Respondents overall feelings about their first-time donation experience are 
positive. The first donation appears to dissipate initial fears and appre- 
hensions, rather than hindering repeat donations. A shift in motives seems 
to occur between initial and later donations, with the Insurance motive 
later becoming as important as the altruism which initially was the domi- 
nant motive. We did not find appreciable evidence that t^c firs: 'mation 
has a negative effect on subsequent donations. If more thorough future 
studies verify this, one will want to look to other factors (such as the 
availability of convenient, regular opportunities to glv? or the evolution 
of individuals' altruism as they get older) to account for present low donor 
retention rates. 

Thesis advisor: Alvin J. Silk Supplementary advisor: Alvin W. Drake 

Title: Associate Professor of Title: Associata Director, 

Management Science Operations Research Center 

Professor of Electrical 





Submitted to the Alfred P. Sloan School of Management on 
May 11, 1973, in partial fulfillment of the requirements for 
the degree of 

Master of Science 

In December, 1970, the Board of United Air Lines took 
drastic action to restore the airline to profitability. They 
fired the president and replaced him with a man with no air- 
line experience. The new president chose to implement profit 
centers as a vehicle to restore profitability. This thesis 
analyzes the problems in the industry and at United in 1970 
and identifies the key variables for success for a firm in 
the industry and for United in particular. Most of United's 
problems were rooted in bad decisions about key variables by 
top management. 

The thesis analyzes the profit center concept chosen by 
United and United's implementation in order to evaluate 1) the 
profit center system as being appropriate to an airline and 
as a solution to United's problems and 2) United's implementa- 
tion as a profit center system and as a solution to United's 
problems. A profit center system is not appropriate to an 
airline because so many of the key variables must be controlled 
by top management that division managers have only limited 
control of costs and revenues. Furtlier a profit center system 
cannot solve United's problems because most of United's prob- 
lems were rooted in bad decisions about key variables by top 
management. These key variables are too important to the 
whole company's success to be decentralized. United's imple- 
mentation recognizes this and m.aintains corporate control of 
most key variables. However, this means that division 
managers have control over only about 25^5 of costs. Thus 
United's implementation is not really a profit center system. 
The use of profit as a measure and the large scale management 
changes which have accompanied could be disfunctional . While 
United's system may be effective for motivating line managers 
(and top management is very enthusiastic about and committed ^ 
to the system) , it cannot solve the profit problems because 
it doesn't address the major key variables of the com.pany. 

A better alternative than profit centers fcr restoring 
profitability ivould be the strengthening of central staffs in 
order to provide top management with better information and 
analysis for making key decisions. This would enable 
management to correct the bad decisions of the 1960's and to 
develope coordinated plans for making these decisions in the 

Thesis Supervisor: Jerry D. Dermer 

Title: Visiting Associate Professor of Management 




Walter Raymond Herbert, '.ll 

Submitted to the Alfred P. Sloan School of 
Management on May 7, 1973, in partial ful- 
fillment of the requirements for the degree 
of Master of Science in Management. 

Aerospace corporate expansion by formation of department or divi- 
sion-sized significant internal growth ventures is studied through the 
literature and by interviews. Emphasis is placed on establishment of 
the venture goals, determination of the organizational structure, ven- 
ture management and control, and motivation. Results are presented in 
each eurea that are based upon interviews with venture managers and/or 
their overseeing executive within the parent fiirm for six gro\>rth ven- 
tures, two in each of three anonymous aerospace firms. Contrasts axe 
drawn with the literature in each subject area. 

Thesis Advisor: Michael S. Scott Morton 

Title: Associate Professor of Management 


Work Relationships in the Delivery of Health Care: 

An analysis of the division of labor between physicians 
and nurse practitioners in outpatient clinics 


Eric L. Herzog 

Submitted to the Alfred P. Sloan School of Management on August 7, 
1973 in partial fulfillment of the requirements for the degree of Doctor 
of Philosophy in Management . 


This dissertation represents a preliminary attempt to structure the 
problem of division of labor between health professionals. The research 
has implications for the nature and organization of the work of nurses 
and physicians in particular and the work of other professionals in the 
health industry in general. In addition, the research is of relevance to 
the theories and empirical work on leadership, role conflict, profession- 
alization, and job enlargement. 

Focusing on the nurse-physician work relationship, the primary ques- 
tions for this inquiry are the following: (1) what factors are impor- 
tant in determining the relative amount of the nurse's responsibility for 
specific health services and (2) what are the effects of the amount of 
the nurse's responsibility on the satisfaction of the nurse and the physi- 
cian with the organization, the quality of service as perceived by the 
nurse and the physician, and the personal efficacy of the nurse and the 

Prior to ascertaining the amount of the nurse's responsibility, a 
representative set of adult health services performed by the nurse and 
the physician are identified. Then the amount of the nurse's responsi- 
bility for each of these services is determined and the extent to which 
several "explanatory" factors are related to the amount of the nurse's 
responsibility is determined. Three factors which are considered are the 
leadership style of the physician, the work group atmoshpere, and the a- 
mount of responsibility desired by both the nurse and physician for 
each of the health services. Analysis of the relationships indicates 
that leadership style of the physician, the nurse's rating of her work re- 
lationship with her physician coworker, and the amount of responsibility 
desired by the nurse are most closely related to the amount of the nurse's 
responsibility. Specifically, the nurse has more responsibility for cer- 
tain health services when the physician's leadership style is more rela- 
tionship-oriented, the nurse rates her work relationship relatively high, 
and the nurse desires more responsibility. 


The relationships between the amount of the nurse's responsibility 
and the "outcome" variables are then examined. The findings Indicate 
the following: quality of service, as perceived by the nurse and the 
physician, is positively related to the amount of the nurse's responsi- 
bility for a few health services; the physician's personal efficacy is 
negatively related to the amount of the nurse's responsibility for most 
of the health services, while the nurse's efficacy is unrelated; the 
nurse's satisfaction with the organization is positively related to the 
amount of the nurse's responsibility for several health services and 
negatively related for others, while the physician's satisfaction is un- 
related to the amount of the nurse's responsibility for most of the health 

The data were collected from twenty pairs of nurses and physicians 
in three ambulatory health care centers. Each pair delivers primary a- 
dult health care. A personally administered questionnaire was used to 
collect the data. 

Thesis Supervisor: John F. Rockart 

Title: Associate Professor of Management 



Donald O'Neal Hewitt 

Submitted to the Alfred P. Slocin School of Management on 
May 11, 1973, in partial fulfillment of the 
requirements for the degree of Master of Science 


The thesis begins with a qualitative description of the educational 
computing environment. Th(-. environment is described as consisting of 
three areas -- Adminisfaticn, Reseorch, and Classroom Support. After 
discussing these threr rir^as, their security requirements are examined 
ill terms of a simple . rcr.Kv/crk. An attempt is made to separate physical 
vnd operating system sr-iirHy requirements. 

The various S3cur"'*:y requirements are compared, and it is asserted 
tliat the solution of rhr r'l'oblems of the Classroom Support Environment 
effectively alleviates the problems of the other areas. 

The MIT Clasii Monitor System, in conjunction with the IBM Resoi.---ce 
:>ccurity System (RSS), is used as an example of a trial solution to 
thesi security requirements. In conclusion, some problems of the 
adaptability or current operating systems to the Classroom Support 
environment are discussed. 

Thc;^is Advisor: David N. Ness 

Title: Associate r^rofcsior of Management 

-61- Jan Hoey 

Planning for an Effective Hospital Administrated Emergency Ambulance 
Service in the" City of Boston 
Submitted to the Alfred P, Sloan School of Manar;eraent on Oct. 
25, 1972, in partial fulfillment of the requirements for the degree 
of Master of Science in Management, 

Daergency health care and particularly emergency ambulance systems 
are a long neglected area of urban services. The objective of this 
thesis is to aid the City of Boston Department of Health and Hospitals 
in the planning of an "effective" hospital administrated enjergency ambul- 
ance service through the development of an "effective" transportation 
subsystem of the ambulance systemo This system is proposed not only to 
greatly increase the quality of service rendered but also to release 
almost entirely the Boston Police Department from this non-police medical 
function of vhich they were the sole purveyors until 1970, 

Three measures of effectiveness are considered relevant. First, 
response time, the time elapsing between the occurrence of an emergency 
and the arrival of an ambulance with a trained medic, must be kept short. 
Second, because of the advantages of employing a secondary back -up ser- 
vice the police will respond to calls for ambulance service when no 
hospital asabulance is available. The arrount of ambulance work ths poUc 
perform should be no more than 57, of the total ambulance runs (this is 
defined as a 95% seirvice level). Third, utilization, the percent of time 
a given ambulance is busy should be kept as high as possible without 
producing unacceptable results for the other two measures, since an 
increase in utilization decreases the cost per ambulance run. 

Since variable personnel costs are the major cost consideration, the 
important question for the transportation subsystem is not how many ambj- 
lance vehicles to buy but how many eunbulances to man at different tiires 
of the day. Data on the present level of demand for emergency ambulance 
service in Boston and teroporal and spatial distributions of this demand 
are used, 

A queuing model for dual source ambulance systems (hospital a^^'^u- 
lances, police backup) developed by Stevenson is applied heuristicially 
to various sized areas of the city in order to gain insight into the 
trade-offs Involved between response time, service level, and utilizations 
as the number of ambulances allocated and area size changes. In some 
sections of the city the response time criterion is the important factor 
effecting the allocation level while service level or utilization is the 
primary factor in other areas. 

An ambulance allocation policy for Boston is developed assuming the 
present level of demand as well as incre-^sed and decreased demand. Sys- 
tem operation statistics (service levels, utilizations) are given. 

Finally, the costs associated with implementing and opera''ing the 
proposed system are considered. 

Thesis Abstract 


Myle Joseph Holley III 

Submitted to the Alfred P. Sloan School of Management on 
February 16, 1973, in partial fulfillment of the 
requirements for the degree of Master of Science 

Existing computer applications in the local government 
sector have in general been transaction-oriented. A number 
of authorities in the field propose that the development of 
comprehensive transaction systems and data bases will lead 
naturally to satisfaction of all management information 
requirements. Systems design has focused on data base issues 
rather than on •'.he managerial environment. 

An analysis of computer relevance in fact should begin 
with examinatiou of the managerial environment. Once the 
key decision-rr.a.-ing and control issues are isolated, it is 
then possible to identify requisite levels of information 

In orclcj: to restrict tha thesis scope, a single 
government function (the Public Works Department in Arlington, 
Massachusetts, a town of 50,000) has been selected for study. 
A simple model of managerial planning and control is 
developed (based upon two models commonly known in the 
management literature) . When the model is applied to the 
Arlington PUD case, it becomes clear that the key 
management task i are five: (1) allocation of resources to 
maintenance, (2] aggregate planning, (3) scheduling, 
(4) introduct"^ V. 11 of technique changes, and (5) control. 

Normative approaches to each of these management tasks 
are suggested. When compared to existing P^TO management 
practices, it appears that the normative approaches can 
lead to efficiency improvements in excess of $100,000 per 

The information and processing elements required to 
support the nor:-.ative management approaches can be clustered 
into four areas: (1) resource use accounting, (2) system 
(e.g., the road network) status accounting, (3) route 
design support, and (4) water billing. These information 
components can be developed manually, or with PWD-based 
computer assistance, or with Town-based computer assistance. 
Th6 latter alt-?rnative appears to be the least-cost solution. 


Thesis supervisor: Michael S. Scott Morton 
Title: Associate Professor of Management 





Gim Poy Horn 

Submitted to the Alfred P. Sloan "^School of Management 
for the degree of Master of Science in Management. 


An introductory Management Information Systems course 
should introduce students to the key hardv;are and software 
components of a corinuter system. The hardv/are components in- 
clude tape drives, disk drives, card readers and CPU; the 
software com.ponentn include compilers, assemblers, loaders and 
the operating system. These hard'-rare and software concepts 
can be introduced through a simulated system such as the one 
used at the Sloan School of Managem.ent in its introductory 
Management Information Systems course. 

These key hardv/are and software issues are discussed. 
A comparsion and discussion of the various philosophies for 
introducing these concepts in thp computer courses at M.I.T. 
is made follov/ed by a discussion of the advantages of using 
a simulated system and possible alternatives. New computer 
problems have been developed to illustrate more of the prac- 
tical and interesting concepts of computer systems. From 
the improved course material, the student will gain more than 
a rudimentary skill in solving managerial problems with large 
data bases on a computer system. 

Thesis Supervisor: David N. Ness 

Title: Associate Professor of Management 



Thesis Title: Computer Networks As A Means For Satisfying 
An Organization's Computer Needs 

Author: Michael Steven Katz 

Sutinitted to the Alfred P. Sloan School of Management 
on May 11, 1973 in partial fulfillment of the requirements 
for the degree of Master of Science. 

This thesis discusses one approach to providing computer 
capabilities for an organization; computer netvrorks. Two 
questions are addressed: 1) the existence question--whether 
an organization should create a computer network, as opposed 
to maintaining separate data centers or buying outside 
services; 2) the design question — what kind of network might 
be appropriate. The thesis attempts to show how the answers 
to these questions depend on the organization under considera- 

Chapter one defines the terminology and the scope of 
the problem; examples of computer networks are described. 
In chapter two an organization model is presented and or- 
ganization characteristics relevant to the problem are 
defined. The issues and factors which surround the network 
questions are discussed in chapter three. Chapters four and 
five synthesize the earlier chapters, describing alternate 
computer options briefly and showing how organization 
characteristics should influence decisions on the existence 
and design questions, 

A small opinion sxorvey was conducted, among sane 
practitioners in this field, to test reaction to the ideas 
and conclusions presented in chapters one through five. 
Chapter six presents the results of the survey together 
with our interpretations and conclusions; suggestions for 
further research are made. 

Thesis Supervisor; Michael S. Scott Morton 

Associate Professor of Management 


An Analysis of the Dcvelopiiicnt and Airdnistration of 
Section 314(d) of the Pjblic Health Service Act, as yijnended 

Richard Maurice King 

Submitted to the Alfred P. Sloan School of Mana,'.'e.'nent on May 11 
1973 in partial fu].fillinent of the requirements for the de^^rce of 
Master of Science. 


In 1966, leris.lation was passed by the U. S. Congress wiiich con- 
solidated nine categorical fon.iula grants for public health progra-as 
into a block fonnula grant to be adn-.nistered by state health deor.rt- 
raents. The programs v/ere consolidated by Section 314(d) of the Public 
Healtn Service Act and included tuberculosis control, chronic disease 
services, heart disease control, cancer control, jaental health services, 
dental health services, radiological health services, healtn ser- 
vices, and general public health services. The primary purpose of the 
consolidation v;as to give the states more flexibility in the aa.dnis- 
tration of their healtn programs. 

This study of the 314(d) legislation is of interest because it 
caused the evolution of a pro,>-ra:a which closely resembles President 
Nixon's proposals for special revenue sharing. The thesis revie-.;s the 
314(d) legislation to dttepnlne the original goals and objectives, 
analyzes the adm.inistrs.tion of the prograjn during its six: year history, 
evaluates the errtent to v;hich 314(d) has met its goals and objeci-ives, 
discusses the program v;ithiji the frajr.ev;ork of block grants and soecial 
revenue sharing, and makes some rccominenaat.ions for the administration 
of Federal programs v/nich are similar to the 314(d) program. Data for 
the thesis v;as obtained froa a review of printed materials and a series 
of personal and telephone interviev-s i.dth state and Feceral officials. 

It is concluded that the 314(d) program closely resembles soecial 
revenue sharinr: and that Federal control of the prograin has been mini- 
mal. The prot.ram has provided the states v/ith more flexibility in 
administering public health programs. The coordination of the 314(d) 
progrcjp.s with other "partnership for health" programs did not occur. 
Compliance of the 31^, (d) program ■l^rith conra^essional intent and Federal 
guidelines and regulations has been partial in some areas. Evaluation 
of the program and the reportxng of expenditures has been poor. 

It is reco;:UP.endcd that future legislation for block grant and 
special reve.'nue sharing prograias be .;.ore explicit regarding Federal and 
state recuirements for adjoinistration. 

Thesis Supervisor: Leon S, VJhite 
Title: Senior Lecturer 



Donald B. Krasnick 

Submitted to the Alfred P. Sloan School of Management on 
May 11, 1973 in partial fulfillment of the requirements 
for the degree of Master of Science 


The problem of excessive delay in the court system has been recognized 
as a major area of concern in the field of judicial administration. Simply 
put, this comes about through an imbalance between judicial supply and the 
demand for court processing. Thus, various efforts have been tried in the 
past which aim at increasing supply and decreasing demand, through both 
direct and indirect means. Past efforts are analyzed initially, including 
court calendaring systems, information systems, increased settlements, and 
other demand-decreasing systems. 

For the purpose of analysis of the courtroom and potential methods 
for curbing excess delay, a generalized, macroscopic-level simulation 
model of the jury trial session of the civil courts was developed using 
the SIMPL simulation language. The courtroom is modeled basically as 
three queues, which feed each other. Cases enter through the trialjist, 
progress to the waiting list (where different priorities may be used for 
entrance purposes), and finally go to individual on_call lists for each 
session. Statistics as to waiting times and delays, judge utilization, 
and number of trials processed are collected automatically by the model. 

The simulation model was used to analyze the following optional 
methods: court calendaring systems, changing the number of backup cases, 
increased settlements, directly increased judicial supply, and various 
shortest operating time algorithms. Results indicated that most methods 
are ineffective due to the large imbalance between supply and demand, 
since they are usually aimed at incremental system improvements. They 

,..,.. 11,. j^j.., 1 _^___ J., Ill — -„j .,-,-j.ii c-;r"'^T" -.,^J■;-^- ~-v.-n 4..j„«^ 

usually II iuui_cu i_u:5co uu uuitjf up aiiu nuii, . ^ liny i j uuuiiiy i.iwit. ji^vjy«.j 

produced the best results. While the SOT rules did not work well, the 
model showed that sophisticated trial-time estimation schemes generally 
yielded marginal returns. 




Submitted to the Alfred P. Sloan School of Management on August 
29, 1972 in partial fulfillment of requirements for the degree 
of Doctor of Philosophy in Management 


The central topic of this thesis is Bayesian adaptive control. 
It develops a conceptual system for analysis of a certain class of 
sequential decision problems representable in the Markovian Fom 
of linear varying parameter regression structures with multivariate 
normal probability densities. The system treats in depth each step 
In the modeling process and then prescribes how policy and measure- 
ment decisions should be made in a changing environment. 

A general class of sequential control problems is introduced 
within which a desired class is defined. Classes of experiments 
and procedures for computation of sufficient experimental statistics 
are developed while the conditional probability resultc of Rosenberg 
[R3] are not only specialized to the class of interest but also ex- 
tended by the additional results derived for unconditior al densities. 
Systems concepts are introduced and quantified in terms cf the state 
parameters of the decision process itself. The Dynamic "'rogranning 
recurrence relations and the customary Decision Theoretic measures 
characterizing the optimal solution are obtained with the latter 
results used to derive bounds on the measurement decisions and the 
optimal value function. The question of solvability of the recur- 
rence relations characterizing the sequential decision problems is 
answered with a general set of guidelines for designing an effective 
stage by stage solution strategy and with a blueprint of the sup- 
porting computational system. 

A completely stochastic version of the adaptive promotional 
control problem of Little [Ll] is specified and a few stages 
analyzed to illustrate selected methodologies and approximations. 

Thesis Supervisor: Gordon M. Kaufman 

Title: Professor of Management 





Submitted to the Alfred P. Sloan School of Management on May 1, 1973, 
In partial fulfillment of the requirements for the degree of Master of 


The purpose of the thesis is to compare the strategic behavior of 
four major and "typical" American defense firms with regard to their 
product-market scopes during the period of 1946 to 1971, to find out to 
what extent similarities have existed, and what major factors have deter- 
mined their strategic behaviors. The definition and classification of 
strategies, the factors which trigger a change of strategy and the process 
of strategy choice are based on Ansoff's framework. 

The main elements, which have been investigated, included the 
expansion and diversification of each firm's product lines and markets, 
its objectives, its performance, its technological and managerial 
capabilities, and the various aspects of the American defense environment - 
defense expenditures, advanced technology, Government-Firm relations, 
procurement and contracting policies, and competition. 

The investigation has come to the following major conclusions: 

a) The highly technological characteristics of weapon-systems is 
f responsible for the predominant orientation of defense firms 

towards technologically sophisticated products and markets, 
government as well as commercial. 

b) The predominant and, in some cases, the exclusive way of 
expanding into non-military markets has been the conversion 
of military products and technology into "civilian" products. 

c) The desire to expand or diversify into non-government markets 
has been translated into actual efforts almofit exclusively in 
periods of declining profitability and growth rates within the 
silitary m::rhct . 

d) Success or failure in penetrating and maintaining position in 
commercial markets cannot be attributed to any "characteristic" 
of the "defense industry" as such, but rather to the particular 
strengths and weaknesses of each individual firm. 

Thesis Supervisor: Michael S. Scott-Morton 

Title: Associate Professor of Management 




Submitted to the Alfred P. Sloan School of Management 
on May 1973 » in partial fulfillment of the requirements for 
the degree of Master of Science in Management, 


A European Company has decided to locate a subsidiary 
in North America. This North American subsidiary could be 
fully owned or set up as a joint venture with a local part- 
ner. Located in one of the three nations of North America 
this subsidiary would have commercial branches in the two 
other nations. The purpose of this thesis is to identify 
and analyze the problems encountered by the Company in set- 
ting a transfer pricing policy applicable to the transfers 
between the Parent Company and the North American subsid- 
iary and between the subsidiary and its commercial branches, 

The dissertation begins with an analysis of the char- 
acteristics of a transfer pricing policy and the various 
transfer pricing methods are successively reviewed under 
economic, pragmatic and mathematical approaches. The sec- 
ond part is devoted to an analysis of the international 
environment and the incidence on transfer pricing policy 
that various constraints like tariffs, taxes, currency 
fluctuations, etc,,, may have. The international envi- 
ronment analysis is followed by a study of the transfer 
pricing policies of some European Companies already faced 
with the problem of having subsidiaries in North America, 
and a brief comparison with United States based interna- 
tional firms is done. Finally, some guides are given, 
summarizing the main questions that a European Company 
with a North American subsidiary has to answer when setting 
a transfer pricing policy. 


The various sources of information used in the prep- 
paration of this paper have been: 

- Current literature and periodicals 

- Personal interviews of 

- Subsidiaries of French Companies 

- Headquarters of American Companies 

- Bankers and lav-yers 

- American, Canadian and French government organiza- 





Thomas Landau 

Submitted to the Alfred P. Sloan School of Management on 
December 18, 1972 in partial fulfillment of the require- 
ments for the degree of Master of Science. 


The purpose of this thesis is to show how a conversation- 
al computer-driven graphical display system can aid a decision 
maker in a situation where the information processing require- 
ments are complex. The portfolio selection process v/ithin 
the Trust Department of a large bank was chosen as the focus 
of the decision support system, primarily because (1) the in- 
formation processing requirements of the job exceed the ca- 
pacity of the unaided human, (2) key elements of the decision 
process are judgmental and thus the process cannot be complete- 
ly automated, (3) the decision process is repetitive in nature 
so that the irformational requirements are stable over time and 
(4) the financial magnitude of the decisions is such as to jus- 
tify the cost of systems support. 

The firsc chapter of the thesis discusses the theory of 
man-machine decision systems, reviews previous experimental 
work in this area, and cites relevant considerations from the 
experimental psychology literature. The second chapter brief- 
ly reviews the financial theory of portfolio management and 
explores the implications of the theory for the organizational 
design of a bank Trust Department. Discrepancies between the 
assumptions of the theory and conditions which exist in tiie 
real world are discussed in order to assess the applicability 
of the theory to real decision contexts and discover the add- 
itional assumptions necessary to bring the theory into line 
with empirical data. The possible role of an interactive 
computing system as an aid to operationalizing the theoretical 
model is discussed. The purpose of discussing the theoretical 
or normative model before a descriptive model of the portfolio 
selection process is presented is to aid in the process of prob - 
lem finding , in which discrepancies between actual and desired 
behavior may be observed. 

The third and fourth chapters are devoted to a descrip- 


tion of a real world Trust Department and a series of ex- 
periments designed to capture some understanding of the pro- 
cess and structure of portfolio selection within that en- 
vironment. The third chapter describes the Trust Department 
from an organizational standpoint. A short history of the 
department is provided and interviews with key personnel are 
presented in an effort to portray the background of the per- 
sonnel, major job functions, communication flows, job frus- 
trations, and attitudes toward the computer system soon to be 
installed. The fourth chapter discusses the design of exper- 
iments and interviews designed to elicit information regarding 
the construct space within which managers consider portfolios 
and the process by which managers revise their portfolios. 
Two psychological instruments designed to elicit managerial 
conceptual structure are described and sample data from the 
administration of each are presented. Hypotheses regarding 
expected changes in managerial conceptual structure following 
the introduction of the computerized decision support system 
are presented. Decision protocols, in which the manager pre- 
sents his own reasoning for making portfolio revisions as they 
occur or shortly after they have occurred, are also provided. 
Some of the theoretical and empirical problems in obtaining 
and using these protocols are discussed. Finally, differences 
in the decision style of portfolio managers within each of 
the three functional areas of portfolio management within the 
Trust Department are described. 

From the interplay of theoretical models and empirical 
data which constitutes the problem finding process, several 
hypotheses are generated which may expla.n why portfolio m.anager 
behavior doesn't always conform to the analytical model. Rele- 
vant data and theoretical formulations from the psychology lit- 
erature are included. 

In "conclusion, the implications of managerial conceptual 
style for quality of job performance are explored. Jn particu- 
lar, it is hypothesized that one kind of cognitive style is 
appropriate to well-structured jobs while another kind i? v/ell 
suited to jobs involving a great deal of judgment and estimation, 

Finally, the hypotheses regarding the potential impact of 
the conversational computer system on individual decision pro- 
cesses and portfolio management are summarized. A monitor 
trace facility is described which is designed to provide data 
for psychological research as well as provide an objective basis 
for the performance evaluation of portfolio managers. 

Thesis Supervisor: Michael S. Scott Morton 

Title: Associate Professor of Management 



Samuel J. Lasry 

Submitted to the Alfred P. Slcan School of Managenent on 
May 16, 1973 In partial fulfillment of the requirements 
for the degree of iMaster of Science In Management, 


This thesis attempts to provide the "state of the 
ai ■'"'', as well as new directions for research. In the field 
of Material Reqiilre'jievxti; Planning. 

After delineatlnjr the distinction "between "dependent" 
an'' "Independent" demand, we will define Material Requlre- 
lae'its Planning and Judge Ita application by a t-ample of a 
dozen companies. V/e will then list major unresolved Issues, 
and propose tentative yolutlons, Me will finally point to 
pxomlslng avenues for further research, and describe where 
aru* how they might be most fruitful.. 

Thesis Supervisor! Stuart E, Iladnlck 

Title I iiSJistant Professor of Management 






Submitted to the Alfred P, Sloan School of Management on 
January 2^■, 1973 in partial fulfillment of the requirements 
for the degree of Master of Science. 

The problem of allocating marketing effort across a 
product line has received scant attention from model builders 
despite its obvious importance. Existing m.odels tend to treat 
individual products in the line as if they were independent. 
If significant interdependencies exist, this approach to product 
line decision making leads to suboptimal resource allocation. 

A marketing planning model which treats product inter- 
dependencies explicitly is developed in this thesis. The model 
consists of two components, a demand and a cost submodel. - The 
thesis focuses on the calibration and t^^sting of the critical 
demand submodel on a set of empirical market data for an 
established line of consumer products. 

Very few interdependencies emerge from the statistical 
analysis. In some cases, the effects of intuitively im- 
portant marketing variables such as advertising do not come 
through. This does not prove that the effects do not exist, 
but only that they were not measured by the combination of 
estimation techniques and data sample used. 

The calibrated submodels are shown to be useful in 
allocating promotional effort across the product line, in 
assessing the economic value of advertising, and for certain 
forecasting purposes, such as production planning over a 
medium run horizon. 

The thesis concludes with suggestions for obtaining 
better measurements of important marketing effects among 
products in a line. 

Thesis Supervisor: John D.C. Little 

Title: Profe?sor of '.derations 

Research ar.d ;;:-r..-a?:e.T.:r.t 




Blchard Henry Linden 

Submitted to the Alfred P. Sloan School of Management 
on May 11, 1973, In partial fulflllmsnt of the requirements 
for the degree of Master of Science. 


In winter 1973, the Massachusetts Blue Cross and the 
Massachusetts short-term general hospitals signed a contract 
which Included provisions for a formal utilization review 
procedure. This thesis examines the potential consequences 
of effective Implementation of this program on the operation 
of the hospital system as a whole. Utilization review Is a 
subset among posslbl:^ policy options aimed at reducing the 
rate of price inflation In the delivery of hospital services. 
Itti major objectives are to eliminate vinnecessary admissions 
and reduce length of stay for those patients no longer 
requiring acute medical care. 

This paper describes the development and application of 
a system.s dynamics simulation model for long range health 
planning. The niodf;l is spet;lf ically designed for use as an 
aid for policy decisions^ The dB.tii used to initialize and 
parameterl ?e the model Included the most recent information 
available on patient useagSc systems assets (beds), and 
hospital c est So The model *s presented in detail and the 
slmulatior, uxpevionces are summarlzod and evaluated. 

It was fomid that effective program Implementation 
forces a dynamic response fyotn tlie system. In particular, 
as the level of patients is redut'ed, hospital beds are closed 
and GX'bsequently total system charges are decreased. A 
cost benefit analysis indicates significant incentives in 
fa"vov of the program. Recommendations for futxire action are 

Thesis Supervisor: Leon S. White 

Title: Senior Lectxirer 

Commissioner of Health and Hospitals, City of Boston 




Thomas Linkas 

Submitted to the Alfred P. Sloan School of Management of the 
Massachusetts Institute of Technology on I'.ay, 1973 in partial ful- 
fillment of the requirements for the degree of Ilaster of Science. 


The Joslin Diahetes Foundation must obtain from the Public Health 
Council of the l-Iasaachusetts State Department of Public Health a 
determination of nsad for expansion of its facilities. Only after final 
approval by the Public Health Council can construction bagin. 

The intent of the investigation hiis been to assist the Joslin in 
the preparation of the application for determination of need. The 
thesis' s objectives are 1) to collect, organize, and prei-cnt data 
relevant to the dctormination of need 2) to evaluate the ability of the 
Joslin to meet present and future needs of the diabetic population, and 
3) to highlight planning issues to be considered once the certificate 
of need has been approved. 

Data relevant to the determination of need includes statistics 
on diabetes, demographic trends and projections, health care trends, 
and internal operating data of the Joslin. Evaluation of the Joslin' s 
proposed expansion indicates that it is modest in scope; future 
demand both for ambulatory-inpatient beds and for outpatient £.ervices 
is potentially large. Suggestions for future study include such 
planning issues as development of an institutional referral bace , 
determination of the Diabetes Treatment Unit bod capacity necessary 
to reduce the wait for admission to medically appropriate levels, the 
possible effects of the artificial pancreas, and the future role of the 
Joslin as a specialty-referral center for diabetics. 

Thesis Supervisor: Loon S. White 
Title: Senior Lecturer 






Robert Gordon Lister • 

Submitted to the Alfred P. Sloan School of Management on May 20, 
1973, in partial fulfillment of the requirements for the degree of Master 
of Science. 


This thesis has two purposes. The first, is to develop a frame- 
work for analyzing a market for new communications equipment. The second 
i,« to apply this framework to market analysis for audio response equip- 
ment. Information regarding the history and opportunities for audio 
response equipment was obtained through personal interviews with the man- 
ufacturers that are presently in the market place, users who have exper- 
Irnce with this type of equipment, and potential users. 

The systems framework that was developed is a multistep iterative 
process structured around the DIME model and a comprehensive checklist. 
The model is iteratively modified taking into account the unique factors 
of Lht 'ndustry involved. To assure comprehensiveness, a checklist is 
provided. In the case of communications equipment, the systems framework 
11' utilized to develop th<^ DOLLAR model. This model is a refinement of 
the tour step, descriptive DIME model and is cuctom tailored for the 
Industrv involved. 

Although audio response has been around for about 10 years, tech- 
nologic;:l advancements are just starting to permit widespread applications. 
Tli« DOLLAR model is used to analyze the Eceps a firm should use in prepar- 
ing a new product for the market. Particular equipment features are 
Included as a result of interviews with users rnd potential users. These 
features are also compared to present equipment capabilities with an 
emphasis on the inherent advantages and disadvantages of audio response 

The ultimate test of both the systems approach and the audio 
response study would be to apply it to a firm developing such a product. 
This is obviously oulsid-^. the scope of the thesis, although many of the 
Individual aspects have been implemented by the existing equipment 
manufacturers . 

Thesis Supervisor: Gordon F. Bloom 
Title: Senior Lecturer 



Further Empirical Evidence 

on Related Issues 



Submitted to the Alfred P. Sloan School of Management 

on May 11, 1973 in partial fulfillment of the requirements 

for the degree of Master of Science 


This thesis evaluates several different approaches and alternatives 
to the area of multidimensional scaling. The data base consists of direct 
dissimilarity measures and stimuli ratings on a seventeen construct scale. 

In particular, the main areas covered are; 1) derived vs. direct vs. 
three way analysis of dissimilarity; 2) aggregate vs. individual analysis 
of dissimilarity; 3) data base problems and; 4) algorithm dependent 

The findings will also give added insight into the cross-sample 
validity of the Green and Rao* results. 

Thesis Supervisor: Alvin J. Silk 

Title: Associate Professor of Management Science 

Green, P.E., and V.R. Rao, Applied Multidimensional Scaling , 
New York: Hold, Rinehart, and Winston, Inc., 1972. 




Michael G. McGuire 

Submitted to the Alfred P. Sloan School of Management on 22 May 
in partial fulfillment of the requirements for the degree of Master of 
Science in Management. 


Probably because of the hectic pace of advance in computer technol- 
ogy, little has been done until yery recently to develop audio-visual 
materials for educational purposes in this area. Now, however, three con- 
panies are producing materials that could prove quite interesting to col- 
leges and universities, which are faced with the task of educating in this 
field students of widely varying technical backgrounds. The purpose of this 
report is to develop criteria for judging the usefulness of these materials 
to students and professors at the Sloan School of Management. These cri- 
teria are then applied to the materials of two companies-Deltak, Inc. and 
Edutronics, Inc. -to determine whether these materials could be applicable 
in the Sloan environment. One of the Management Information Systems cour- 
ses at Sloan is then used to illustrate how those materials judged appli- 
cable could be incorporated into a typical course. 

In developing the criteria, consideration was given to a number of 
areas. The various objectives of education were discussed as well a teach- 
ing methods that can be used to accomplish them. Classification of mater- 
ials turned out not to be a trivial problem and is discussed in some de- 
tail. In addition, the evaluative criteria of other authors are considered. 
These diverse elements are then examined in light of the particular educa- 
tional environment of the Sloan School to arrive at a set of criteria 
suitable for judging various audio-visual materials, which are directed 
to computer education. 

Thesis Supervisor: John F. Rockart 

Title: Associate Professor of Management 





Cyrus Rustam Mehta 

Submitted to the Alfred P. Sloan School of Management on August 3, 1973 
in partial fulfillment of the requirements for the degree of Doctor of 


This dissertation provides a methodology for the multiperiod adap- 
tive control of one or more policy variables belonging to a system of 
linear simultaneous equations by Bayesian methods. The methodology is 
developed in the context of a specific problem, the dynamic regulation of 
the wellhead price of natural gas. A mathematical model is first formu- 
lated which can probabilistically predict the magnitude of the additions 
to natural gas reserves and the supply of produced gas due to new con- 
tracts for specified values of the wellhead price of natural gas in each 
time period. Next a probabilistic utility function is defined over tne 
range of values assumed by these three variables. Based on the criterion 
of maximizing expected utility a sequential N-period optimal pricing stra- 
tegy is then evaluated. This strategy enables the decision maker to com- 
pute an optimal level for the wellhead price during time period j, on the 
basis of the a priori and sampling information available up to time period 
j-1 for j = 1,2,...,N. Finally one and two period optimal pricing strate- 
gies are computed numerically and these results are discussed and compared. 
The dissertation concludes with a consideration of the general classes of 
policy models which can be adapted to this form of analysis and points out 
the limitations of the specific mathematical model and associated utility 
function for the regulatory problem faced by the natural gas industry. 

Thesis Supervisor: Gordon M. Kaufman 

Title: Professor of Operations Research and Management 






Submitted to the Alfred P. Sloan School of Management on May 11, 1973 
in partial fulfillment of the requirements for the degree of Master 
of Science. 


This thesis describes a study of the use of Job Bank job-matching systems 
by the Massachusetts Division of Employment Security, The study addressed 
two questions, first does the system actually work to facilitate the 
placement activity of the Division and second, what factors influence 
the system's ability to maintain this facilitative role? Data to provide 
answers to these questions were obtained by a review of various operating 
documents and a series of interviews with a wide range of staff members. 

Due to the unavailability of comprehensive data, a definitive "effec- 
tiveness" evaluation was not possible, howevei^ a number of quasi-measures 
would appear to indicate that the system is, at best, minimally effective, 
especially in servicing disadvantaged applicants. The major factors 
influencing this effectiveness center around the ability of the system 
to actually meet applicant information needs, maintaining a solid employer 
interface, integrating the system into the interviewer's role, and the 
level of management interest. 

Thesis Supervisor: CHARLES A. MYERS 


Thesis Advisor: JOHN F. ROCKART 







Submitted to the Alfred P. Sloan School of Management on 
May 11, 1973 in partial fulfillment of the requirements for 
the degree of Master of Science in Management* 


Of all the management functions, one of the least under- 
stood and most improperly practiced is that of corporate 
acquisition. This thesis is intended to point out those 
areas of the acquisition process which are of primary concern 
to the small, single-area business; to understand those items 
of primary concern in devising and implementing a viable 
acquisition strategy. 

A study of two small corporations with prior successful 
acquisitions was made in order to analyze a real situation 
and provide a description of that company's successful ac- 
quisition strategy. Executives of a large bank and certified 
public accounting firm, involved in business acquisitions 
and mergers were interviewed to obtain another viewpoint. 
Current relevant written and published information was analyzed 
and consolidated in order to give added perspective and 
ninderstanding to the data gathered from the case studies emd 

The major conclusions derived from this study are 
summarized as follov/st 

1. The more definitive a company is in assessing its 
own goals and strengths and weaknesses, the greater the 
possibility of a successful acquisition. The criteria and 
methods developed to evaluate a prospective acquisition 
originate from' this inward assessment. 

2. The motivation and leadership of the chief executive 
officer has a direct positive psychological effect on his own 
company ajid the prospective seller. This is especially true 
during negotiations if there is an honest and frank exchange 
between the executives of the two companies. 

3« Convincing salesmanship by the chief executive on 
the reason "why" to merge can override most impediments and 
the ability to determine a good deal from a bad one rests 
solidly on judgment and innate business capabilities. 

Thesis Advison Mason Haire 

Title I Alfred Ps Sloan Professor of Management 



TITLi;: Intoractivo D'^buoaorG 

AUTHOR: Charier. P.. Monot 

Submitted to the /Mfrcd P. Sloan School of Manaarnent on May 

11, 1973 in partial fulfillnont of the rcauirements for the 

degree of Master of Science in flanacrenent . 

Interactive debuqainq is analyzed. First, neneral 
notions of bucrs (alcorj tlirn errors) and debucair.g (testina, 
location and correction) are discussed. A formal framework 
is then constructed for the cebucging process and the 
debunging event. The event (the cessation of normal processing 
so that debuactiny actions can occur) is the focus of further 
analysis. Five tynes of debugcring syster.s are then outlined: 

DObject code interpretation 

2) Source code interpretation / 

3) Compiled (assembled) debug instructions 

4) Instruction substitution (breakpoint) 

5) Hardware interrupt 
These five tyr^es of debunging systems are then classified 
according to seven attributes: 

1) Initial comni]ation 

2) Running efficiency 

3) Mode (interactive or batch) 

4) Trap on variable reference 

5) Trace 

G) Foreign host debv^gging 

7) Separate debugger required 
The interpretive systems tend to have flexibility at high 
cost, and the obiect code systems tend to have less flexibility 
at lov;er cost. A cost/1 enef it analysis is presented of six 
debugging features: 

1) Symbolic interaction 

2) Incremental modification 

3) Run backv.'ards capability 

4) Programmability 

5) Extendability 

6) Graphic output 
It is predicted that no breakthroughs in debugging are 
iiominent. A.lthounh present techniques will be combined to 
produce powerful interpretive/compiled dcbugaing environments, 
bugs will remain an annoying reality. 

Thesis Supervisor: David TJ. TIess 

Title: Associate Professor of 'lanagement 


by Donovan Benson Moore 

Siibmitted to the Alfred P. Sloan School of Manage- 
ment on May 11, 1973 in partial fulfillment of the require- 
ments for the degree of Master of Science. 

This thesis is designed to be a useful tool in the 
design and implementation of the health care component for 
a government funded Family Day Care System. Each logical 
step dov;n the path tov/ard the realization of an ideal model 
for the delivery of health care within a day care system-- 
from a demonstration of the need to the mechanics of the 
model itself--is presented. 

To justify the undertaking of such a topic, the need 
for adequate health care had to be surfaced. In the first 
Chapter, histories of case studies of child neglect (from 
Children's Hospital in Boston) due, at least in part, to 
the lack of a day care facility, are summarized. From 
these specific declarations of need, the next step is the 
presentation of general, but nonetheless revealing, statis- 
tics (also from Children's Hospital) depicting the strong 
correlation between the need for hospitalization and other 
variables such as economic status, health problems, and 
access to day care. 

Once the need is established, one must look at and 
analyze the present facilities. Therefore, Chapter II 
consists of sumraaries of detailed interviews with the 
directors of a representative sample of day care systems 
in Massachusetts. Two systems are located in dov;ntown 
Boston, the third on the edge of town in the South End 
of Boston, and the fourth in the rural tov;n of Gloucester 
on the north shore. These interviev/s provide a rather 
complete description — including costs, methods of teaching 
health care, services rendered, and suggestions — of the 
current ability of day care systems to deliver health 
care to the participating children. 

By recognizing the need, comparing the need to the 
present facilities, and assimilating the suggestions, a 
model for the delivery of quality health care to children 
participating in a day care system can be f ormulated--the 
content of the third chapter. The model answers such 
questions as : to what extent should parents be involved?; 
how is stabilization of random services obtained?; how 
should a health care component be coordinated?; hov; should 
it be funded? Thus, the model is designed with sufficient 
flexibility to allow all systems to incorporate it; and 
-yet each system can be assured that health problems 
peculiar to its environment v/ill not go unattended. 

Thesis Supervisor: Leon S. Vfnite 
Title: Senior Lecturer of 




Clinton Leigh Mouer 

Submitted to the Alfred P. Sloan School of ManaPer.ent on Mav 11, 
1973, in partial fulfillment of the requirements for the depree 
of Master of Science in Management. 

Liquefied natural gas (LNG) has become an important element 
in the world enerpy picture. The process od chanpinp natural pas 
in to its liquefied form enables this enerpy source to be imported 
and exported between non-contipuous continents. Thus natural pas 
has become a ready substitute for oil and other enerpv sources 
in those countries which do not have sufficient natural resources 
within their ovm natural boundaries or available from friendlv 
neighbors on the same continent. As in the case of oil, natural 
gas is now a trade comnoditv between the "have's" and "have not's". 

The economics of LNG are such that it only becomes advantageous 
to use when indigenous supplies are inadequate or when load factors 
justify LNG as a peaking component much the same as pumped storape 
is used for peak shavinp; in electrical utilities. In the first 
case where there is not enough natural pas to meet demand to start 
with, LNG becomes economical for base loading and this in general 
increases the average cost to all consumers. 

The fact that LNG as a high price commodity has a place in the 
U.S. energy picture is supported by showing the nlace that manufactured 
gas (now referred to as SYN pas or synthetic gas) had in the 19th 
and early 20th centuries as a specialty fuel. Manufactured gas 
played a prominent role in the development of illumination and x^as 
used extensively in the early 1800 's for street lighting. Later 
manufactured pas V7as used almost exclusively for street lighting 
due to its superior illum.ination properties even though the pas 
was available only at a much higher price than other light sources. 
Only after natural gas became available in abundant quantities 
did it displace the higher priced manufactured gas. 

Today, in addition to the use of LNG, we see a return of manufactured 
gas under the pseudonym SYN gas. Some very prominenc people in 
the industry even include LNG in the SYN pas definition. 

LNG can be and is being imported in to the U.S., Europe, and 
Japan, the major consuming countries, at prices which are attractive 
for peak shavinp and at a price below that required for SYN pas to be 
competitive. LNG technology is fast approaching the point v;here 
LNG becomes competitive as a base load enerpv source. Alreadv 
several utilities in the enerpv hungry northeast are using base 
load LMG to sunpl;' their gas customers. The economics are justified 


because of large shortfalls in previously contracted pas deliveries 
via the pipelines froin the Gulf coast area. The implication is 
that there is either insufficient capacity in the pipeline or that 
there is insufficient gas production at the well head to meet existing 
contractural commitments. This says nothing of the potential growth 
which could be made in the gas industries if the gas were available. 

One likely cause of the present gas shortage; is the low prices 
of natural gas imposed by the Federal Power Commission which has 
discouraged additional exploration for new natural gas reserves. 

In this thesis I have attempted to show via historical analogy 
and two case studies of actual LMG facilities that LNG is justifiably 
a large constituent in the world energy picture. While the tv70 cases 
illustrated (Exxon Libya and Algeria Arzew) do not turn out to be huge 
money makers, they at least marginally show that even these earliest 
projects have managed to just about break even. This is a remarkable 
accomplishment considering the monstrous capital investments (just 
over one half billion dollars for. these two projects) and the 
complicated technology and logistics with each project involves. 

In the future this author predicts that LNG and SNG will 
continue to play a large part in meeting the world energy demands. 


Formulatloji of_^ a Forecasting Model 
for the Abrasive Grain Industry 


William Douglas Neal 

Submitted to the Alfred P. Sloan School of Management on May 11, 1973, 
in partial fulfillment of the requirements for the degree of Master of 

The purpose of this study was to develop an appropriate sales 
forecasting model for the abrasive grain industry. Efforts were 
divided among (1) selection of the proper model, (2) justification 
of possible exogenous variables, (3) validation of the resulting 
model, and (4) updating techniques. 

Abrasive grains industry statistics used in the analysis were 
those as published quarterly by the Abrasive Grain Association (AGA) . 
Because of the high correlation of industry sales to various key 
economic indicators, regression techniques were chosen for the models. 

Three different models were developed to be used in conjunction 
with each other. One predicts yearly abrasive grains sales as a 
function of estimated durable goods production. The second forecasts 
quarterly sales as related to estimated durable goods production, 
automobile production, and a seasonality factor reflecting decreased 
output during the vacation season. The third model also predicts 
quarterly sales but uses instead the actual lagged value of durable 
manufacturing from the previous quarter, along with a seasonality 

Testing the three proposed models revealed a systematic bias 
caused by a time trend in the coefficients of the regression equations. 
Further development concluded that the models should be formulated 
using a weighted regression of recent data and updated continuously. 

Thesis Supervisor: Warren H. Hausman 

Title: Associate Professor of Management 



Computer Aided Picture Transformation 
by Jean - Michel Natter 

Submitted to the Alfred P. Sloan School of Management 
on May 11th, 1973, in partial fulfillment of the 
requirements for the degree of 
Master of Science in Management, 

This paper reviews the transfor- 
-mations which accept an image as input and give another 
image as output. 

The use of such transformations 
for picture enhancement, bandv^ith compression, pre- 
processing for pattern recognition , and visual arts, will 
be considered, together with the criteria which will 
determine the selection of a given transformation in each 
case. This will be follov/ed by a brief survey of those 
properties of the visual system v/hich are directly relevant 
to the subject, v/ith examples of the implications of each 
property. The transformations themselves will be reviewed 
in the third part. They will be classified at a first level 
by the type of variable they accept as input for the 
transformation, and at a second level by the variable i;h'5y 
use as output. 

Examples of applications and 
processes will be given not only in the computer field, but 
in other fields of image transformation - video, photography 
graphic arts - which can provide useful examples and 

Some fields -particularly 
bandwith compression - use transformations justified either 
by some property of the visual system of the observer 
-subjective quality, threshold of discrimination - or by 
technical and probabilistic properties of the equipment and 
image. Only the former transforms will be reviewed here. 

Thesis Supervisor: David N. Ness 

Title: Associate Professor of Management 




Jakob J. Nigg 

Submitted to the Alfred P. Sloan School of Management on 
May ^, 1973 in partial fulfillment of the requirements for 
the degree of Master of Science in Management. 


This study considers the solid waste pollution 
problem in the greater Boston area and the disposal methods 
currently beins utilized. The basic argument is that 
technolocical bases and management methods have been 
developed throue:h extensive federal and private studies, 
for effective and efficient solid waste management, but are 
not being implemented. Basic stumbling blocks appear to be 
institutional and financial problems. 

To accomplish this study, data were collected 
from cities and towns in the Greater Boston area and from 
manufacturers of municipal incinerators. A case study for 
a regional system is included. 

Responsible for pollution control should be the 
state as specified in the General Law for air- and 
groundwater supply. The supervision has to be done by the 
division of environmental health, department of public 
health and the air pollution commission. The control 
over the management of the solid waste disposal facilities 
and collection should be the responsibility of the local 
governments. Each community should decide which solution 
and method they need for their particular problem. Waste 
disposal can be done through private contractors or with 
their own work force, independently or together with other 
cities (regional). Financing of new facilities can be 
through municipal bonds, issued to the operator of the 
new facility. 

The study suggests that increased awareness of 
men's duty towards conservation of the environment and 
natural resources could significantly improve the present 
situation. Educational programs should be initiated to 
win public understanding and support for new methods and to 
remove some of the existing prejudice regarding costs and 
locations of new facilities, building of regional systems, 
etc. The emphasis should be directed towards reducing the 
quantity of refuse, establishing a market for recycled 


products and disposal of the remaining waste through 
resource recovery processes. 

A combined effort of government, industry and 
public is necessary to achieve this goal. The result 
would be a healthier environment at a reasonable cost, 
to the benefit of present and future men. 

Thesis Supervisor: Dr. Arnold E, Amstutz 
Title: Senior Lecturer 





Alfonso Ocainpo-Gavirla 

Submitted to the Alfred P. Sloan School of Management 
on May 11, 1973 In partial fulfillment of the requirements 
for the degree of Master of Science, , 

This thesis describes the warehouse location problem 
as well as the suitability to solve the problem using a 
general integer linear programming algorithm. For this pur- 
pose vje used the Mathematical Programming System Extended 
(MPSX) that is a linear programming package produced by IBM 
that has the capability to process mixed integer linear 
programming problems using Mixed Integer Programming (MIP), 
an optional feature of MPSX. Then, vje decided to bring more 
reality into the model. We felt that customer service v.'as 
a very important factor that was not taken into account and 
we incorporated customer service by means of an additional 

The results obtained using MPSX-MIP indicate that 
the algorithm will find a "good" solution very fast, but 
for large problems it may take a long time to prove optlmallty. 

Thesis Supervisor I Amoldo C. Hax 

Title I Associate Professor of Management 






Antonio Lacayo Oyanguren 

Submitted to the 

Alfired P« Sloan School of Management 

on May 4, 1973 

in partial fulfillment of the requirements 

for the degree of 

Master of Science in Management, 

The purpose of this thesis is to study a Nicaraguan trucking firm, 
Transportes Pesados de Nicaragua S. A, , which faces the problem of 
optimizing its routing structure. 

Specifically, the problem is visualized as a network of cities and a 
number of products that have to be transported among these cities in 
any given month by any one of the trucking firms operating in the 
country. The compajiy is interested in finding the aggregate schedule 
it should follow in that month in order to majcimize gross profits. 
This is done by taJcing into account the revenues earned ajid costs 
incurred in transporting these goods along the different routes, the 
time consumed in traveling between cities, and the totaJ. capacity of 
the finn. 

The model used is a linear programming model. Actual data collected 
from corapamy records amd from several organizations in Nicaragua is 
used to find the parameters of the model. Sensitivity Analysis is 
performed on the results in order to obtain additional insight into 
the problem. 

Thesis Supervisori Arnoldo G. Hax 

Titles Associate Professor of Management Science, 





Pascal A. Payet-Gaspard 

Submitted to the Alfred P. Sloan School of Management on 
May 11, 1973, in partial fulfillment of the requirements for the 
degree of Master of Science. 


In this thesis, we study the economics of the Western world 
primary aluminum industry, focusing on prices for ingot. First, 
we look briefly at the technology and the structure of the industry. 
Then we try to identify the areas in which models can be helpful 
to the managers and the use of an information system in running a 
commodity producing industry. After a qualitative analysis of the 
postwar history of prices, we build an econometric model for the 
Western world primary aluminum industry. The results support the 
assumption made beforehand of the influence of inventories on prices 
and of an output policy of the producers. Finally, we use the model 
for forecasting. The simulation results raise the question of whether 
the aluminum industry has reached a mature stage in its development 
and which returns an individual producer can expect in investing in 
new smelter facilities. 

Thesis Supervisor: Arnoldo C. Hax 

Title: Associate Professor of Management 





E. James Potchen 


William R. Schonbein 

Submitted to the Alfred P. Sloan School of Management on May 4, 1973 in 
partial fulfillment of the requirements for the degree of Master of Science 
in Management . 


The specific objective -of this work is to demonstrate the applica- 
bility of a unique statistical analysis technique to the measurement of 
diagnostic utility, vjhere diagnostic utility is defined in terms of a 
physician's actions in response to the information provided by diagnostic 
procedures. The long term objective is to provide a m.eans of processing 
statistical data to provide a basis for the determination of the efficacy 
of various diagnostic procedures. The unique statistical method used in 
this work is known as the entropy minimax method of pattern discovery 
and is based on an information theory approach to the problem of extrac- 
tion of information from a collection of data by means of detecting a 
pattern in the data. The application of this technique to the measure- 
ment of diagnostic utility involves the demonstration of the following 
thesis. The diagnostic utility of a given procedure can be determined 
by observing whether or not the result of the procedure contributes to 
the definition of a pattern in the actions a physician takes, based only 
on the information presented by the procedure. 

Elements of this thesis were tested using a data set consisting of 
the results of clinical and radiological examinations of 1563 patients 
suffering skull trauma. These data consisted of coded responses by 
examining physicians as recorded on a prospective questionnaire, follovjed 
by the outcome of the radiological examination. These data were processed 
using a computer program which approximated the general entropy minimax 
pattern detection algorithm, with the objective of demonstrating the 
ability of the technique to identify patterns of diagnostic attributes 
which were meaningful to practicing physicians. The results indicate 

f-Tiq 1- f-Ti<=» orvt-r'on\r m-inimav t> o t^ f- o >- n /-] n_ c /^r»TTiO-»-ir t-o r>T^r» i_n ijo COuld id'^ntif" TTC^n- 

ingful patterns and that the technique will be useful in the analysis of 
more complete efficacy data when such data becomes available. 

Thesis Supervisor: Arnoldo C. Hax 

Title: Associate Professor of Management 


Anthony J, Quayle 

Submitted to the Alfred P. Sloan School of Management 
on May 11, 1973 in partial fulfillment of the requirements 
for the degree of Master of Science. 


An initial survey of concepts of performance appraisal 
arising from responsibility accotuating cjad mrjiagement- by- 
objectives finds a considerable congruence in terms of the 
desirability of appraising on the basis of biisiness results 
and leads into a more wide-ranging comparison of the tv;o 
approaches in terns of planning, goal-setting, reviewing and 
appraising. The system of M.B.u, put forviard by Jolin Huir.ble 
is used as a base and others contrasted where appropriate. 

It is found that there is no difference in plarining 
under both approaches, Tv;o motivational styles are identi- 
fied in budgeting, that of motivating through ex-post analysis 
of variances (motivation by pressure) and that of motivating 
through fitting the budget goal to the responsible manager's 
level of aspiration (motivation through achievement need), A 
similar dichotomy is possible iii the use of H,3.u,, although 
it is found that almost all writers favv^r the latter approach. 

It is suggested that both responsibility accounting and 
M,3,U, fall short of providing objective appraisal due 
essentially to inter-dependence bet\;een responsibility centers 
and the fact that reporting business results on an interim 
basis leads to a xiBgleco of oht; oi-it;- dependence of current 
decisions. Both, hov;ever, can provide a substantial input 
to appraisal. 


Thus, M.B.O. is seen priinarily as a part of planning 
and control and, in viev; of the commonalities noted, an 
integration is proposed by administering II.B.U. through the 
controller's department in an attempt to achieve an 
operational and motivational compatibility. A number of 
potential advcjitages are discussed and finally the problems 
of the staff departments - controller's and personnel - in 
assijming different roles are addressed. 

Thesis Supervisor: Michael S. Scott Morton 

Title: Associate Professor of Management 



Thesis Title: Evaluation of an Automatic Programming System for 
Management Information Systems 

Author's Name: Jeffrey Lawrence Rosenberg 

Submitted to the Alfred P. Sloan School of Management on July 25, 1972, 
in partial fulfillment of the requirements for the degree of Master of 
Science in Management. 

The decision to pursue a research program with the object of building 
an automatic programming system is examined. The specific goals of this 
work, and the problems involved, are discussed, in general and in relation 
to the specific application chosen as the first target: management informa- 
tion systems. The relevant areas of current technology are examined, and 
a set of goals and criteria for the current effort, as well as for automa- 
tic programming in general, are proposed. Preliminary results of the first 
six months of work are presented, along with a summary of the current status 
and future prospects of on-going projects. The relationship of automatic 
programming systems to the design, implementation, and usage of management 
information systems is examined. 

Thesis Supervisor: William A. Martin 

Title: Associate Professor of Management 




Alexander N, Rossolimo 

Submitted to the Alfred P. Sloan School of Management on June 25, 
1973 in partial fulfillment of the requirements for the degree 
of Master of Science in Management, 

Abstract ' 

This thesis investigates the relationship betvreen the 
relative price differentials between nationally advertised 
brands and private labels of supermarket products and the 
advertising-to-sales ratios of the national brands. The rela- 
tive price differential is equal to the ratio of the difference 
in the retail prices of a national and an equivalent private 
brand to the price of the private brand. 

The sample of 48 product categories consists of 3 product 
groups: 26 food products, 12 household products, and 10 health 
& beauty aid items. The prices were recorded in supermarkets 
in the Cambridge area operated by four major chains, in raid-1973. 

For all Zf8 product categories, the correlation coefficient 
between the relative price differentials in mid-1973 and the 
advertising-to-sales for 1972 is equal to 0,6l . For each of the 
3 product groups, as well as for all 1+8 product categories, 
the relative price differential tends to increase v/ith an 
increase in the advertising-to-sales ratio. For a given value 
of the ratio, on the average the health & beauty aids group 
has the highest relative price differential; the household 
products group has the second highest differential; snd the 
food products group has the lov/est differential. 

We also find that the relative price differential in mid-1973 
tends to increase with the total advertising expenditures by each 
national brand diiring 1972, The correlation coefficient between 
the uirroi-ential and tiie ctuver tiiiiig expeiiuitiu. es , xOi'- a.xx n-u 
product categories, is equal to 0,2fO, 

In order to interpret our results, v/e hypothesize that 
the degree of product differentiation, supported by advertising, 
achieved by a national brand is positively correlated with the 
profit rate from the national brand to its manufacturer, 
which in turn is positively correlated with the possible 
discount to the buyer of the equivalent private label brand. 


A Cutting Plane Method for the Fixed Cost Problem 

Jean-Marc Rousseau 

Submitted to the Alfred P. Sloan School of Management on August 17, 1973 
In partial fulfillment of the requirements for the degree of Doctor of 
Philosophy in Operations Research. 


The fixed cost linear programming problem (FCLP) refers to a linear 
programming problem in which each variable incurs a fixed cost or charge. 
In addition to its linear cost, whenever the variable takes a strictly 
positive value. This problem and its generalizations have a wide set of 
applications in business and economics; among these, we find the warehouse 
location problem, the routing problem, and the fixed cost transportation 
problem. The thesis begins vith a survey of these applications and the 
extraction of a standard form for the FCLP problem on which further analy- 
sis is based. It is shown how the variations can be transformed into the 
standard form. 

Our study Is devoted to the development of a cutting plane method 
and Its role In the perspective of a general framework (essentially a 
branch-and-bound) for FCLP algorithms. Most algorithms found in the 
literature could easily be classified in the context of the general 
procedure. Analysis of the structure and properties of the problem 
reveals that algorithms which seek local minimum points (minimum wii;h 
respect to neighborhood) are almost certain to be non-effective because 
of the proliferation of these local minima. 

The cutting plane method developed in the thesis (the FCLP cut) 
comes as the generalization, for the non convex case, of outer lineariza- 
tion methods used for convex problems. The FCLP cut is developed from 
a linear under-approximation of the FCLP objective function. This func- 
tion is constructed at each step from the linear approxi-^iation of the 
marginal change in cost induced by unit changes of non-basic variables 
at a given feasible point. Convergence properties of the method are 
studied in depth and sufficient conditions for convergence to a global 
optimal solution are identified. Since the cutting plane method is to 
be used In conjunction with a general branch-and-bound procedure, the 
existence of these sufficient conditions is not required for use of the 
cutting plane method. Other cuts are briefly studied including the cuts 
of Benders, Tui, and Gomory. The most interesting fact is the construc- 
tive similarity we can demonstrate between the Benders and FCLP cuts; 
they differ only by the space in which they are derived. 


Computational experimentation was conducted with the FCLP cut and 
clearly demonstrated the usefulness of the technique. The cut was 
tested in the context of both a cutting plane algorithm and a branch" 
and-bound algorithm. Several practical modifications are suggested in 
order to improve efficiency. The need and directions for larger scale 
testing are pointed out together with the possible generalization to 
other non-convex and M.I. P. problems. 

Thesis Supervisor: Jeremy F. Shapiro, Associate Professor of Management 






Sabmltted to the Alfred P. Sloan School of Management 
on December 15, 1972 in partial fulfillment of the 
requirements for the degree of Master of Science. 


Tbla thesis is concerned with the problem of implementing EDP 
systems in the lodging industry. A general survey of this industry's 
past experiences with EDP systems is presented and the currently 
•▼ailable options are described and analyzed. A detailed analysis 
Is made of the underlying problems in the industry that have impeded 
the development of computer systems in hotels, and a concent of an 
ideal management information system called HOMICS* is presented. 

HOMICS is a system which combines latest state-of-the-art 
computer hardware and software and yet, may be presented to the 
hotel industry in a very simplistic and realistic approach. ilOMICS I 
is basically an expanded regional batch processing system for a 
group of hotels This system is designed originally with the thought 
of incorporating it into HOMICS II. HOMICS II is the second stage 
in the development of the total HOMICS system, and consists of 
»in1 -computers in each hotel that are tied into the larger, regional 
computer. The combination of HOMICS I and II will produce an inte- 
grated hotel management system that can assist the hotel manager 
in various facets of his decision-making process. 

* Hotel Management Information and Control System 

Thesis Supervisor: Malcolm M. Jones 
Title: Assistant Professor of Management 




John David Rudolph 

Submitted to the Alfred P. Sloan School of Management on May 11, 1973 
in partial fulfillment of the requirements for the degree of Master of 

Several prior approval programs have been introduced and implemented 
across the country in an effort to control and/or reduce medical costs 
associated with Medicaid. Prior approval in this case refers to the pre- 
admission screening (review and approval or denial) of perspective in- 
patients. The screening function has been either performed via the state 
title XIX agency responsible for the program (as in California and 
Colorado) or a designated medical foundation (as in Illinois, New Mexico 
and as proposed in Massachusetts). These prior approval programs are 
aimed directly at a primary problem responsible for excessive costs-- 
unnecessary hospital admissions. The second major aspect of these schemes 
provides for in-hospital utilization review of services rendered and 
patient requirements in order to expedite patient discharge. This pro- 
cedure addresses the problem of unnecessary hospital days. 

In a study of the Medi-cal system in California, CHAP in Colorado, 
HASP in Illinois, CHAMP and Medicaid Cost Control Program in Massachusetts 
and HAPP in New Mexico, the following program goals were collected: (1) 
control/reduce costs, (2) reduce/eliminate unnecessary hospital admissions, 
(3) control lengths of stay, (4) upgrade/maintain the quality of care pro- 
vided to Medicaid patients, (5) create a management system to measure pro- 
gram effectiveness and to identify/control abuses. 

The intent of this thesis is to: (1) describe and analyze the exist- 
ing programs and the effort within Massachusetts to choose and implement 
one of the tv/o major program proposals and (2) anticipate the impact of 
the 1972 Amendments to the Social Security Act (HR 1--Pub Law 92-603) on 
the future of prior approval programs and on the major participants in the 
health care delivery system as it applied to title XIX eligibles. Since 
the critical element in the PSRO concept is the physician, a physician 
study was conducted to identify the issues and opinions of the Bay State 

The analysis of the existing programs and the Massachusetts proposals 
generated various criteria with which the schemes might be evaluated. A 
few of those criteria are: the extent of screening, detection of length 
of stay abuses, certification standards, program acceptability and 


provision for feedback. The differences between the programs have been 
displayed along fifteen dimensions in a comparison matrix. Various 
effects have been attributed to the programs including decreased average 
length of stay, savings of significant Medicaid dollars, decrease in 
hospital admissions growth below that of the increase in eligibles and a 
decrease in bed days. Along with such measures of success, there have 
been various problems encountered from incorrect certification standards 
to physician rejection and sabotage. Indications are, however, that 
prior approval itself may not be as great a deterrent against unnecessary 
hospital admissions than concurrent utilization review, but that it has 
beneficial effects in the area of service scheduling. 

The future of prior approval in Massachusetts has been greatly influ- 
enced by the passage of the Bennett Amendment into law. The greatest 
question and stumbling block--should a state agency or a medical founda- 
tion control the system?--v/as settled through the legislation which placed 
the responsibility entirely on the physicians. The law will effect all 
the major participants: the patient, the practitioner or provider, the 
hospital or institution, the state, the federal government, the PSRO and 
the state and national professional standards review councils. Several 
crucial issues stand out among those which are discussed: (1) physician 
pessimism concerning the PSRO concept and goals, (2) imbalance in the 
health care delivery system aggravated by the PSRO program which directs 
patients away from hospitals and into the arms of physicians who do not 
want to render service to them (mainly due to the fee structure), (3) 
potential overload of hospital outpatient departments, (4) physician ad- 
version to the bureaucratic nature of the PSRO concept and to prior ap- 
proval specifically (note: prior approval is not required under the PSRO 
law), and (5) the mechanism for physician organization surrounded by poli- 
tical and administrative uncertainty. 

The work presented here represents an attempt to apply systematic 
thinking and management science techniques to the analysis of the delivery 
of health care to Medicaid (and, later. Medicare) eligibles. Continuing 
support of those facing the task of designing and implementing control 
systems in the public sector is sorely needed. This study shows that the 
PSRO program will depend most heavily upon man-machine decision support 
systems, statistical and financial analysis, operations management ex- 
pertise and extensive organizational development efforts in order to be 
successful . 






Antonio Sanchez-Bell 

Submitted to the Alfred P. Sloan School of Management on 

May 1973 in partial fulfillment of the requirements for a 

degree of Master of Science in Management 


This thesis studies the cash nanagement problem when the 
compensating balance requirements involve an average deposit 
balance over a number of periods. 

Two assets are considered: cash and an Interest earning 
asset. Fixed and variable transfer costs are incurred when 
transferring funds from one form of asset to the other, 

A dynamic programraing model initially developed by 
Professor Warren H, Hausman is presented which theoretically 
solves the problem in an optimal way. Two alternative methods 
are also described: a simple static heuristic policy of the 
control-limit type, and a simple dynamic heuristic policy. The 
latter, however, is shown to be computational Infeaslble, 

The optimal programming model is shov;n to be computational 
feasible. A numerical example is solved using a probability 
distribution of net cash flows obtained from empirical research. 

The results of the dynamic programming model are compared 
with those obtained from a simulation model using the simple 
static heuristic policy. Significant improvements are found 
by using the dynamic programming model, and it Is concluded 
that it is not generally optimal to use a static eon&rol limit 

Thesis Supervisor: Warren H. Hausman 

Title I Associate Professor of Management Science 




Submitted to the Alfred P. Sloan School of Management on 

May 7, 1973 j in partial fulfillment of the requirements for 

the decree of Master of Science. 

Two organizational studies have been undertaken to describe 
in case format hov; two large east coast electric utility 
companies made capital investm.ent decisions. Doth deci- 
sions were unique in character involving: an activity or 
technical approach that was completely nev; to each firm. 
The data v;as gathered during a series of structured 
personal interviews with the participants in the decision 
process at four levels of management. 

The data collected has been evaluated against what are 
generally described as the behavioral and economic theories 
of the firm. The study v;as constructed around the be- 
havioral model, although the observations will in part 
support the economic model. 

The major findings in analyzing the cases are: 

1. Conspicuous unsatisfactory conditions greatly 
facilitate the decision process and minimize 
internal conflict. 

2. The use of the decision support techniques avail- 
able from, management science is minimal or non- 
exlstant . 

3. The behavior of utility firms is quite similar to 
similar published studies on industrial companies. 

4. The behavioral model of the firm is useful to pre- 
dict how a small group within a large organization 
might behave, but the economic theory is the m.ore 
useful way of predicting the long run actions of 
the entire firm. 

The two case studies are intended to be useful to the re- 
searcher devising decision support or energy planning 
computer models. 

Thesis Supervisor: Gordon F. Kaufman 
Title: Professor of Management 




John Arthur Scherf 

Submittad to the Alfrei P. Sloan School of Management 
on August 13, 1973, in partial fulfillaient or the 
requireaents tor the degree of Master of Science. 


Articles discussing computer and data security topics 
are scattered over a very large number of sources which 
publisn articles on security on an irregular basis. This 
makes it guite difficult for the security consultant, the 
internal auditor, the computer user, the data processing 
manager, the business executive, or anyone else to find out 
what has actually been done in this field without doing 
extensive, time-consuitiing, literature research. To ease 
this problem there currently exists approximately seven 
computer security bibliographies containing froai 50 to 25U 
entries. Although they are all less than three years ola^ 
only one has annotations over a few sentences in length, and 
only two use any sort of classification or index scheme. 
The one bibliography with paragraph lengtn annotations is 
pritaarily concerned with very technical aspects of hardware 
and software access control. Most of the other 
bibliographies are also concerned with only certain subsets 
of security problems. This paper is apparently the first 
attempt to produce a bibliography covering all aspects of 
computer and data security, and having annotations that more 
than superficially describe each article's content. 

This bibliography contains 1,022 entries. About half 
these entries are extensively annotated, another guarttr 
bei'ig superficially annotated, and the rest being 
unannotated. Ail extensively annotated entries ar-- rated as 
to their current usefulness and uniqueness. A subject index 
of 160 items is provided for referencing purposes. The 
introduction to this bibliography brieiily discussc-ss 
privacy, security, and integrity; IhrertL;^ of data aisuse; 
physical, procedural, and hardware/soi tware security; 
development and scope of the bibliography; the subject 
index; outstanding articles and booK.s; co.-nputer security 
firms; and the future. A list of 34 fir:ns selJiag computer 
security services or equipment is presented following the 

Thesis Supervisor: Stuart E. [-ladaicfc 

Title: Assistant Professor of Management Science 




Marco Enrique Schnabl 

Submitted to the Alfred P. Sloan School of Management 
on May 11, 1973 in partial fulfillment of the requirements 
for the degree of Master of Science, 


This study is an attempt to gain some insights into 
the actual utilization of softv/ara support in the area 
of business planning. 

The research involved interviewing six managers of 

??ortv*'T'? hO"!^**? ?.P_d ■f".-iTnn-.<ibr!T>nnr' fiGnmnnnos. and fifteen 

corporate plwiaers for a period of at>cut fifteen vocks. 
Besides the intorvievrs, close and detailed reviews were 
conducted on the available documentation, both of 
software companies and planning dopartmonts. The study 
limited its viev: to the software support to the corpo- 
rate planner, because that was the most accessible so\irce 
of infonnation. The study concludes with generalisations 
about the determinants of planning complexity, about the 
relation between EDP departments, planners, and software 
houses, about the nature of software supported planning 

Thesis Supervisor: Michael S. Scott Morton 

Title: Associate Professor of Management 





E. James Potchen 


William R. Schonbein 

Submitted to the Alfred P. Sloan School of Management on May 4, 1973 in 
partial fulfillment of the requirements for the degree of Master of Science 
in Management . 


The specific objective of this work is to demonstrate the applica- 
bility of a unique statistical analysis technique to the measurement of 
diagnostic utility, where diagnostic utility is defined in terms of a 
physician's actions in response to the information provided by diagnostic 
procedures. The long term objective is to provide a means of processing 
statistical data to provide a basis for the determination of the efficacy 
of various diagnostic procedures. The unique statistical method used in 
this work is known as the entropy minimax method of pattern discovery 
and is based on an information theory approach to the problem of extrac- 
tion of information from a collection of data by means of detecting a 
pattern in the data. The application of this technique to the measure- 
ment of diagnostic utility involves the demonstration of the following 
thesis. The diagnostic utility of a given procedure can be determined 
by observing whether or not the result of the procedure contributes to 
the definition of a pattern in the actions a physician takes, based only 
on the information presented by the procedure. 

Elements of this thesis were tested using a data set consisting of 
the results of clinical and radiological examinations of 1563 patients 
suffering skull trauma. These data consisted of coded responses by 
examining physicians as recorded on a prospective questionnaire, followed 
by the outcome of the radiological examination. These data were processed 
using a computer program which approximated the general entropy minimax 
pattern detection algorithm, with the objective of demonstrating the 
ability of the technique to identify patterns of diagnostic attributes 
which were meaningful to practicing physicians. The results indicate 
f-li!^^ thp ^rtf->-on-\r rn-iriTTTiov T>o*-f-ov'n ^j^c nr\tTGi^yr techniGue could id'^Htif'' Te'^rt- 
ingful patterns and that the technique will be useful in the analysis of 
more complete efficacy data when such data becomes available. 

Thesis Supervisor: Arnoldo C. Hax 

Title: Associate Professor of Management 





Submitted to the Alfred P. Sloan School of Itar.agemcr.t 
on AugUGt 1, 1973 In partial fulfiilinant of the re- 
quirements for the degree of Kaoter of Science* 

The field of dcntr.l health caro hcs received little attention frora a 
eystems analytic vlcvr\>olnt. I.'ecd and demand for dental care are both ln«- 
creaslns; there is a chor'cage of reaourcos to oupply caro. Tills thaois 
first concidcrs possible \fayo of iHiproving thi UealUi care oystcn. 
A prosilclng approach ic to train su:ciliary parconnol to psvlonn tac!:« 
fornierly parformad only by tha dcntict, A insthematlcai proj^rasriilns codcl 
la developed to dctcminQ the op'cionsl comblnntion of auch auxiliaries and 
examine the cooto involved in their v.cq, A rcaticuic n^imarical exar.plo is 
studied to iiiucivate the potential iinpoct of the n:ouei. 

Thesis Supervisor: Unrren 11. H^^asman 

Title: Aocoeiatc Professor of Management 




BaymoDd N. Seakan 

. "Subaitted to the Alfred P. Sloan School of Management on 
January 27, 1973. in partial falfillment of the requirement 3 
for the degree of Master of Science." 

The bicycle and liicycle accessories industry is growing. 
Consumers are not only buying greater numbers of bikes, but also 
more expensive models. Though this growth is encouraging an increase 
in bicycle theft, bicycle security systems now on the market do not 
offer adequate protection against the sophisticated tools of the 
bike thief. 

A proposal has been made here to start a new venture based on 
a recently developed bicycle locking device called the "Interceptor". 
The features of tais lock offer a much uigher level of security than 
chain/lock combinaticrs now dominating 95'-> of the high security market, 
while at the same tice being less expensive and much lighter tian these 
game products. A cautious interpretation of the results interviewing 
a limited sample of bicycle owners in the Boston area indicates a 
probable consumer acceptance ci the product and a recognized higher 
level of security offered. A price of $21.95 seemed acceptable. 

A study of industry markups allow the bicycle dealer between 
33 and kO^ profit margin on the retail price before shipping. A 
wholesale price for the "Interceptor" at 113.50 makes it attractive 
to the retailer in terms of markup (4ajb on retail price) and higher 
quality offered. 

Because of the relative? y high costs of dealing through a 
distributor (20';o of wholesale price) the choice was made to sell 
directly to dealers, Retail bicycle stores were chosen as train outlets 
because of the necessity of personal selling to establish an awareaess 
OD the part of the bicycle buyer of the theft problem and the need 
for a high-security lock. The retailer will be offered a free lock 
■with every 3 purchased to encourage his initial stocking. This 
offer will be made by a combination of direct ciail and trade journal 
advertising. Under conservative assumptions of no growth in bike sales 
or sales 01 more exoenaive bicycles, the salea foreuaat at a 5/^ iyai'kct 
share for the "Interce-otor" wcjld be 30.0C/J units per year. 

A new enterprise casea on rsanufacturing and selling this device 
would require an investment of $^-3,000. However, ^it would be an 
extremely profitable venture with a calculated Zbp return on investment, 
Od this basis the feasibility of starting such a company is evident. 

Thesis Supervisor: Gordon F. Bloom 
Title: Senior Lecturer 




Larr7 Jay Shorey 

Submitted to the Alfred P. Sloan School of Management 

on May 11, 1973 in partial fulfillment of the requirements 

for the degree of Master of Science. 


In 1970, a management system intended to improve government opera- 
tions was developed within Massachusetts. The system was called a 
Program Management System (PMS) . It is an improved version of Planning- 
Programming-Budgeting (PPB) Systems which have been used in federal and 
state programs since 1955. Design for PMS was completed by 1971; how- 
ever, the system has not been utilized by the Massachusetts government. 

This study attempts to determine the contributions which PMS offers 
for management in the government sector. Strengths and weaknesses of 
the system are discussed, and PMS is compared with PPB systems. In 
addition, possible reasons for Massachusetts' failure to utilize PMS are 
advanced. Finally, efforts underway which may involve PMS in govern- 
ments around the country are discussed. 

Results from this thesis indicate that PMS is indeed a valuable tool 
for use in public management. It is speculated that political motives 
were primarily responsible for Massachusetts' abandonment of PMS. 
Future hopes for implementation of PMS will depend on the extent to 
which both the executive and legislative branches of a government are 
willing to support the system. 

Thesis Supervisor: Leon S, White 

Title: Associate Professor of Management 


Michael G. Smith 

Submitted to the Alfred P. Sloan School of 
Management on 11 May 1973 in partial ful- 
fillment of the requirements for the degree 
of Master of Science 


This thesis presents a system design for a computer software package 
called Project Control System (PCS). Through interaction with PCS, a 
project manager can construct a reporting system which will satisfy his 
needs for project control information. The thesis begins by establishing 
the need for such a system. The assumptions which were made during the 
design process are then presented and discussed. 

The bulk of the thesis is a functional analysis of PCS. The functions 
are grouped into those which structure the project data base (structure 
functions); those which select specific portions of the data base (selec- 
tion functions); those which store and retrieve data and maintain the data 
base (storage functions); those which process, alter, and manipulate the 
project data (processing functions); those which provide an interface 
between the manager at a computer console and PCS (man/machine interface 
functions); those which provide the capability of sending messages between 
various users of the system (message transmission functions); and a group 
of miscellaneous functions. 

The thesis then presents a more detailed design of the mechanisms 
which would be used to structure and access the data base. Finally, the 
work required to transform the information presented here into an opera- 
tional system is discussed. 

Thesis Supervisor: David N. Ness 

Title: Associate Professor of Management 



Thesis Title: An Interactive Planning and Control System for a 
Subscription Business 

Written by: Alan Spoon and John Wigodsky 

Submitted to the Alfred P. Sloan School of Management on May 15, 1973 in 
partial fulfillment of the requirements for the degree of Master of 

The objective of this joint thesis is to design and make opera- 
tional a model supported planning and budgeting system for a subscrip- 
tion business. The aim of the system is to provide the tools necessary 
to operate this business in the most profitable manner. 

Customers enter a series of states which characterize a typical sub- 
scription business, i.e. prospect, trial subscription, first year renewal, 
and multiple year renewal. Direct mail, salesmen, or media techniques 
may be employed to solicit customers to enroll in a trial subscription. 
These customers may then convert to long-term subscription, and may 
thereafter renew as long-term subscribers. Promotional schemes, which 
may be looked upon as capital investments, influence entry into and 
residence in income generating states. 

The model based system consists of three component models which 
interface in a conversational mode via input and output documents. Each 
of the models assists decision making in a separate environment. The 
first is a market model which aids the manager in estimating market 
receptiveness to a particular promotion strategy. The second is a finan- 
cial model which enables the manager to evaluate the time discounted 
profitability of a set of direct mail promotion strategies. The final 
one is a macro planning model which analyzes the macro environment for 
the year's operation enabling the manager to plan and project optimal 
annual strategies for all promotional efforts. 

These are embedded in a planning and budgeting system which enables 
the manager to assemble and execute an annual program which is optimal 
with respect to any one of several criteria including profitability in 
the current year, profitability over all future periods, or some combina- 
tion thereof, depending on organizational constraints. 

Inherent in the model-based system is a financial analysis directed 
to the problem of asset evaluation in a subscription business. In the 
macro model the financial analysis directly addresses the capital bud- 
geting problem, as the manager evaluates alternative promotional (invest- 
ment) strategies in an effort to define his optimal annual marketing 
plan. By iterative use of the model the manager is able to determine 


the best capital budget for direct mail, salesmen, and media promotional 
efforts. The macro model provides quarterly output documents, facilita- 
ting on-going planning and control for the whole subscription business. 
Information which serves as the basis for the macro model's analysis is 
assembled with the aid of the remaining two models. 

The financial analysis developed in the model for direct mail stra- 
tegies enables the manager to evaluate and rank, promotional schemes which 
have different time structured cash flow patterns. This component micro 
model traces customers through various states of the direct mail sub- 
scription process, identifying net cash flows which are then discounted 
back to the time of execution of the initial promotion. A marginal cost/ 
revenue analysis designates those promotion schemes which should be 
selected. Input to this model is derived from systematically compiled 
historical data which characterizes transitions between states and from 
market projections produced by the third and remaining component model. 

The marketing analysis inherent in the planning and budgeting system 
enables the manager to plan strategies for his market and monitor their 
impacts by means of adaptive control. With quarterly updated output, the 
macro model assists in monitoring the performance of the manager's annual 
plan within the marketing environment. Conditions necessitating modifica- 
tion of the plan are identified with the aid of the output documents. The 
annual plan is supported by the periodic usage of the direct mail component 
model which assists the manager in detailed strategy selection. 

Another aspect of the marketing analysis resides in the third compo- 
nent model which projects market receptiveness to large scale direct mail 
promotional activity focused on the initial enrollment of customers into 
the subscription process. The model incorporate several critical factors 
which have a significant effect on market response to promotions. The 
model's information needs are met by the manager's current plans and by 
exponentially smoothed information gathered from previous experience. 

To support the model package described above, there must be an on- 
going data collection system. Information used in the model is stoxed as 
part of a data support system. As new and better information becomed 
available it is fed into the data bank to be used in future model runs. 

The thesis gives attention to the environment in which a model sup- 
ported decision system exists. In addition to the specification of a 
program for using the three models in an integrated fashion, the thesis 
discusses problems of designing interactive models for managers ^iio are 
not. computer oriented. Also discussed are issues surrounding the imple- 
mentation of the kind of model system developed within. 

Thesis Supervisor: John D. C. Little 

Title: Professor of Management and Director of Operations Research Ctr. 



Stephen Lee Tamenbaum 

Submitted to the Alfred P. Sloan School of Management on May 11, 
1973, in partial fulfillment of the requirements for the degree of 
Master of Science in Management. 


Tablecloth Corporation, the firm being studied, manufactures 
plastic tablecloths and sells them to several of the r.ajor national 
chain stores. Recently, Tablecloth Corp. has received a new exclu- 
sive contract from Southern Stores, their largest customer, which 
will increase sales by introducing a fourth tablecloth size, 60" 
round, and a second sales territory, serving Alabama and the adja- 
cent states. The contract, or listing, allows Southern's warehouses 
to order nine different tablecloth pattern/color combinations for the 
new round size, as well as nine different pattern/color combinations 
for each of the originsil three sizes. 

The purpose of this thesis is threefold. First, to forecast 
the demand for each of the nine new round size pattern/color combi- 
nations to enable Tablecloth Corp. to build inventory in anticipa- 
tion of the first order under the new contract. After the first 
month of new listing orders, the Southern Stores warehouses will 
have achieved the desired inventory levels for each of the items 
piirchased from Tablecloth Corp. Subsequent orders are expected to 
follow a stable demand pattern, until further changes are made in the 
contract. The second major focus of the thesis will be to develop a 
forecasting model which can be used to produce monthly demand fore- 
casts based on the long term stable demand pattern. Finally, the 
forecasting model, and estimates of forecast errors, will be employed 
to improve Tablecloth Corp. inventory control and production sched- 
uling procedures, by allocating buffer stocks more efficiently ajnong 
the various items. 

Based on the results of this study, a seasonsilized exponential 
smoothing model produces the most accurate monthly forecasts. EO^ 
models indicate that small production lots are optimal, due primarily 
to an effectively zero setup cost. The detailed production schedul- 
ing system rccom.T.ended gives orders on hand highest priority, while 
allocating slack production to build buffer stocks. During slack 
periods, items are ordered for production based on stockout probabil- 
ity, with the item having the highest probability of stockout being 
schedulea first. 

Thesis Supervisor: Arnoldo C. Kax 
Title: Associate Professor of Management 



Thomas Richard Thomsen 

Sabmitted to the Alfred P. Sloan School of Management on May 11, 1973 in 
partial fulfillnnent of the requirements for the degree of Master of Science, 


The major purpose of this thesis is to examine the potential u^^■ of 
multiple; regression analysis as a tool to aid middle level, non-technically 
oriented iTianagors in the forecasting and control of expense employees in 
the nitinufiicturing environment. 

Most manufacturers consider nonproduction or expense einployees 
to bo A seniivariable cost when it comes to preparation or control of 
budgets. That is; some portion of the total expense employees is relatively 
fixed while the remainder varies as a function of other variables of the 
business. This paper presents examples of how multiple regression 
analysis could be used by management to analyze data of the immediate past, 
identify those variables of the business which appear to be significant as 
far as the variability of expense employees is concerned; and then, through 
the use of available computer programs and the computer, test those 
variables and generate an equation which best fits the data. This equation 
would have expense employees as the dependent variable and, 'U the extent 
that the future is representative of the past, could be used for forecasting 
and control purposes. 

The methodology used was to first determine if across sixteen 
different factories, there were nneaningful relationships between expense 
employees and other factors of the business; such as production employees 
Rlono or production employees plus tinne. Then, four of the factories were 
eolected to see if, through a more detailed analysis, relationships between 
expense employees could be further differentiated by types of functional 
organizations, and with respect to other variables of the business such as; 
capital expenditures, perform.ance against budget, product mix, etc. 


In addition tc furnishing conclusions regarding tho use of 
multiple regression analysis as a tool for forecasting and controllinR 
expense cnnployoes in the manufacturing environment, equations are 
presented v/hich could be used as models for each of the three functional 
organizations ::nd total expense employees at four different factories. 
Finally, the dificrcnccs in variability of the expense employees in each 
of the throe functional organizations as related to direct employees and 
time are discusbed. 

Thesis Supervisor: Warren H. Hausman 

Title: Associate Professor of Management 


An Evaluation of Taxt Processing Systems 

David Urbani 

Submitted to the Altrad P.Sloan School of Management on May 
11, 1973 in partial fulfillment of the requirements for the 
degree of Master of Science. 


Until recently, computers have been used almost 
exclusively for data processing functions. The payoffs for 
automating accounting procedures and scientific 
calcu lat ional procedures was large enough to justify the 
relatively expensive early computer systems. However, as 
economies of scale and new te.chnology lower the effective 
cost of computer systems, new and more imaginative 
applications are being developed. Text processing is one of 
these applications, and it is to this subject that this 
thesis is directed. 

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To determine the productivity increase made possible by 
text processing systems, three sources were evalurited: the 
production of this thesis, various industry reports. and a 
test conducted on ten subjects, Th-? productivity increase 
realized all cases were significant, and ranged from 50 to 
1000 per cent. 

Overall, text processing has been shown to be a viable 
and cost effective method of producing documents in the 
business environment. 

Thesis Supervisor: Stuart A. Madnick 
Title: Assistant Pro£3ssor oJ 





W. Michael Wade 

Submitted to the Alfred P. Sloan School of f-^anagement on 
June, 1973 in partial fulfillr.ent of the requirements for 
the degree of iVaster of Science. 

When trying to estimate the expenditures that should 
be made of health care in America, economists often disagree 
on the role health care play^ in our society. Three general 
approaches are found: 

1) Every person has a moral "right" to adequate health 
care and one's socio-economic condition should 
present no barrier, 

2) Health care should be viewed as a good 
with the level of services provided determined by 
the lav/s of supply and demand, 

3) Health care is an investment in the "human machine" 
and therefore net economic yield is the best guide 
to the amount of services that should be provided. 

Which of these viev/s or v/hat com.bination of them is 
correct is a question v;hich must be answered before policy 
decisions can be made concerning health insurance, delivery 
of health services and health management. Too often sweep- 
ing changes are suggested without first dealing with the 
underlying philosophical issues of health care's role in 
society. This must be done first before mutual agreement 
can ever be reached on U.S, health expenditures. 

What is attempted here is a fair presentation of all 
points of view making extensive use of the available liter- 
ature along with the researcher's own analysis of the 
arguments where appropriate. 

After a comprehensive review of the literature, a num- 
ber of conclusions have emerged. There were many defini- 
tional problems encountered which have contributed to a 
general confusion in current debates concerning exactly what 
is being discussed. This difficulty is particularly pro- 
nounced on the health care as a right issue. In addition, 
those debating in this area seem to be speaking on two very 
difficult levels; one group taking a strong philosophical 
and idealogical aporoach while the other is more concerned 
about the availability of health care to all, 

Many of the arguments given in support of health care 
as a consumer good were found to be quite weak economically 
and unsupported in the literature. Health care is in fact 
a "different" and unique good in the m.arket place. 

Viewing health care as an investment is an approach 


which should be developed to avoid incorrect estimates as 
to the value of health care expenditures. However, the 
investment approach taken by itself may lead to biasses 
against certain economic groups. 

In short, it seems apparent that none of the three 
approaches is, alone, appropriate for considering health 
care expenditures. Each, if single-miindedly followed, 
seems to end in excess. Rather, final decisions must 
consider all views and ultimately rely on the wisdom of 
value judgements. 

Thesis Supervisor: LeonS, White, Ph.D. 
Title « Senior Lecturer 


By John P. Watson 

Sv±»mitted to the Alfred P. Sloan School of Management 
on June 18, 1973, in partial fulfillment of the re- 
quirements for the degree of xMaster of Science 


The purpose of this thesis is to present a frame- 
work for marketing planning in the context of a new 
venture in a specific industry: minicomputer-based 
information systems. The formal framework is supplemented 
and illustrated with examples drawn for interviews with 
several nev/ firms in the field. 

The fram.ework concentrates on the beginning 
phases of marketing planning, up through form.ation 
of an initial strategy. The major elements of the frame- 
work are the basic definition of the company's business 
the inputs to that definition (classified as opportuni- 
ties and constraints), an initial market profile, analysis 
and selection of markets, and marketing strategy. 

The mini-systems industry is currently very active 
and competitive, and is felt to be in need of marketing 
planning. The framework in this thesis is intended to 
be a description of what such planning should include. 

Thesis Supervisor: Malcolm M. Jones 

Title: Assistant Professor 
of Management 








Submitted to the Alfred P. .Sloan School of Management 

on May 11, 1973 in Partial Fulfillment 

of the Requirements for 

The Degree of Master of Science 

The purpose of this study was to assess the anticipated im- 
pact of the current Nixon administration policy of Federal 
revenue-sharing on the subsidized family planning service 
level in the State of Massachusetts. Approximately 56,000 
low income women, or about 49% of the estimated 114,000 in 
need in the State, are currently provided with subsidized 
family planning services. These services are financed pri- 
marily through Federal categorical (specific) grants to com- 
prehensive family planning projects, which serve 33,000 
patients, and through Federally-financed third-party reim- 
bursements for services to physicians and hospi tal s , • whi ch 
serve 23,000 patients. 

As CO 




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cal grants 
ind of reve 
-party reim 

joint Fede 
ties for th 

the Nix 
e two a 
tegori c 
go vernm 
e d in f 
nd 1 oca 
nds of 
egori es 
s. The 
for fam 
th rough 
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dmi ni 
of u 
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ch wi 
t cur 
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. Con 
for f 
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ents . 
11 be 
rent i 
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isms a 
of fam 

on , F 
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wi 11 

al 1 oc 

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i nat 
er , 

osi t 
ng s 


g e n c 1 e s 

1 i dated 
tate and 
that cat- 
ed under 
ces wi 1 1 
res for 
ion of 
ervi ces . 

The method used to assess the implications of Federal 


revenue-sharing on the 

level (annual patient load) o 

if sub- 

sidized family plannin 

g services in the State was a 

qua 1 i t a - 

tive systems analysis, 

in v/hich a set of interacting 


variables were related 

to an output variable, define 

d as the 

servi ce level . The i n 

put variables were defined as 

actors , 

contexts ( cons tants ) , 

laws, rules, and regulations. 


i deologi es . Within th 

ese categories, each variable 

was fur- 

ther classified as either increasing or restraining 

wi th 

respect to the output 

variable. An increasing varia 

, b 1 e was 

defined as a factor wh 

i ch was judged to be largely f 

■ u 1 f i 1 1 i n g 

its potential for posi 

tively influencing the service 

level . 

A restraining variable 

was defined as an element whi 

ch was 

judged to be largely n 

ot fulfilling its potential for posi- 

tively influencing the 

service output. The systems 


thus served as a basis 

for assessing the impact of the loss 

of family planning categorical grants on the subsidi 

zed serv- 

Ice level in the State 

The conclusion of the study was that the anticipated net 
impact of Federal revenue-sharing on the subsidized family 
planning service level in Massachusetts will be to quantita- 
tively and qualitatively depress this level. Thus, it was 
not f t. ". t that the system could fully compensate for the loss 
of the categorical grants to be eliminated under the revenue- 
sharing program. 

Thesis Supervisor; 

Leon S. White 
Senior Lecturer 







Submitted to the Alfred P. Sloan School of Management on 
May 7 , 1973, In partial fulfillment of the requirements for 
the degree of Master of Science. 


The purpose of this thesis is to identify the activities associated with the 
complex task of designing, developing, and testing automotive type engines prior 
to mass production, develop a network representation of those activities, transcribe 
the network into computer language, evaluate the network in the planning stage, 
and demonstrate some of the features of a computer assisted Management Information 
System for project control at the managerial level. 

The Experimental Engine Project Master Network was developed at the 
aggregate level, and designed primarily to assist the manager in assessing the progress 
of the project relative to fixed target dates; it is not intended to track dally detailed 
events at the micro level. A method for cost and resource accounting was developed 
as part of the Control System. 

Several specific recommendations are made as a result of this thesis and 
are presented in two categories: I) the adoption of proposals developed within the 
thesis (exclusive of the network technique) that might contribute improvements in 
the orgalnzatlon and m.anagement of the Engine Product Development Program, and 
2) the implementation of the computerized network management information system 
for project control . 

Thesis Advisor: Warren H. Hausman Ph.D. 

Title: Associate Professor of Management Science 






Submitted to the Alfred P. Sloan School of Management on 
May 11, 1973, in partial fulfillment of the requirements 
for the degree of Master of Science in Management 


Aerospace program managers, because of the many critical decisions 
they must make and the variety of areas over which they must have knowl- 
edge and maintain cognizance, require a prodigious amount of information 
in their day-to-day management efforts. Many aerospace companies are 
investing heavily in the development of computerized management informa- 
tion systems to assist in satisfying this need for program and other 
managers. This thesis examines the utilization of management information 
systems by aerospace program managers with an emphasis on how these 
systems are being used, what are the problems that exist and what can 
be done to improve their utilization. 

The initial stages to this study included a literature survey of 
the program management function and management information systems. From 
this survey a normative model of both the program management function and 
management information system was developed. 

A descriptive model of both, describing how management information 
systems are utilized by program managers in one aerospace company was 
then constructed. Three other aerospace companies were interviewed to 
give the model credibility. 

Using the normative model constructed via the literature search, 
the descriptive model was analyzed and evaluated. The results indicate 
that while program managers do use management information systems exten- 
sively, they feel the systems are in need of significant improvements in 
the areas of reliability and efficiency and are incapable of providing 
certain kinds of critical information, such as technical performance data, 
that are essential to 20od program management decisions. 

The major problems seem to be a coordination deficiency in fitting 
the system's objectives to the varied needs of the many users and the 
inadequate methods of gathering and codifying the kinds of management 
information that truly reflect program progress. 

Thesis Supervisor: John F. Rockart 

Title: Associate Professor of Management 


A Pilot Study of Planning and Control Systems Used in 
the Construction Industry 


Herbert Becker Zlen 

Submitted to the Alfred Po Sloan School of Management on 
Kay 11, 1973 in partial fulflllaent of the requirenents for 
the degree of Master of Science, 

Elements of the construction Industry surely are not 
\inique in the Anerican econoay. The output of conctruction 
firEC is a on3-timG product, but so is that of rnanufaoturlnff 
job shopo, Coiapetitive biddinc is a comnon contract-awarding 
system in defence projects as x;ell as building prelects. 
Skilled labor accounts for a large percentage of costs in 
many types of products. Easy entry and high risk are foxind 
In contexts other rhan construction. It 3s not the uniqueness 
of the elements, but their confluence within the realm of 
a single industry that makes construction unlike any others, 

The uynariiics of tv;o construction characteristics 
particularly seem at odds. On one hand, the competitive 
bidding procass dictates that supervisory and overhead staffs 
must be minimized in order to reduce costs « On the other 
hand, high labor costs necessitate careful controls A 
basic trade-off exists, supervisory costs against labor costs* 

This thesis examines how this trade-off is made in 
practice. It is a pilot study of planning and control systems 
used by contractoro to manage the labor component of con- 
stinictlon projects. Of course, merely to present these 
systems is not illuminatingo In order to learn from them, 
it is necessary to develop a standard against Vf'nich zhey 
can be corupared. 

For this purpose, a normative model of planning and 
control systems is extracted from the literature; The 
frameuork chosen is based on four perspectives of the prob- 
lem: cybernetic, structural, behavioral, and technological. 
It is assumed that a good planning and control .system is 
one that compares favorably vrith the normative model. 

Using a questionnaire to gather da.ta on planning 
and control systems in use, it is post;lble to test three 
hypotheses! general contractors have better systems than 
subociitractors, onn tractors have botrer systems than 


small contractors, and firms directed by professionally- 
trained general managers have better systems than chose 
directed by union-trained general managerso Although 
this research gives some insight into the control problem, 
It does not provide any evidence to support these hypo- 

Thesis Supervisori Jerry D, Deriaer 
Title? Visiting Associate Professor of 





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