Flexible manufacturing systems evaluation: An alternative approach

  • Itzhak Krinsky
  • Abraham Mehrez
  • G. John Miltenburg
  • Buddy L. Myers
Article

Abstract

The purpose of this article is to integrate the von Neumann-Morgenstern theory of utility functions and the mean-variance approach of portfolio analysis within the computational framework of selecting a production technology to replace an existing one. A stochastic, static one-period problem is formulated, and a measure that takes into account both the capital costs of implementing the new technology and the random monetary value of its output is identified to solve the problem. The properties of this measure are discussed particularly with reference to the optimal selection decision. An example is described to illustrate the methodology.

Key Words

mean-variance approach optimal selection replacement technology stochastic one-period models von Neumann-Morgenstern utility function 
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Copyright information

© Kluwer Academic Publishers 1990

Authors and Affiliations

  • Itzhak Krinsky
    • 1
  • Abraham Mehrez
    • 2
  • G. John Miltenburg
    • 3
  • Buddy L. Myers
    • 4
  1. 1.Faculty of BusinessMcMaster UniversityHamiltonCanada
  2. 2.Administrative SciencesKent State UniversityKentUSA
  3. 3.Faculty of BusinessMcMaster UniversityHamiltonCanada
  4. 4.Administrative SciencesKent State UniversityKentUSA

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