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Stochastic optimal control of internal hierarchical labor markets

  • J. S. Henderson
Contributed Papers

Abstract

This paper develops an optimal control model for a graded manpower system where the demand for manpower is uncertain. The organization's objective is to minimize the discounted costs of operating the manpower system, including excess demand costs. The stock of workers in various grades can be adjusted in two ways. The first method is outside hiring flows, which is the usual control variable used in previous research. The second method is to control the transition rates between grades of the hierarchy, an instrument not previously studied. Incorporating the transition rates into the control variables creates time lags in the control process. The resulting problem is solved numerically using an approximation for the time-lagged control variables. The numerical example is based on the Air Force officer hierarchy. The model is used to examine such issues as the desirability of granting tenure to workers who are not promoted to the highest grade and the effects of length-of-service and demand uncertainty on manpower policy.

Key Words

Stochastic optimal control labor hierarchy time-lagged control internal labor markets manpower planning 

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Copyright information

© Plenum Publishing Corporation 1980

Authors and Affiliations

  • J. S. Henderson
    • 1
  1. 1.Department of EconomicsOhio State UniversityColumbus

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