Generalized lot sentencing rule for estimating the value of production lot for sale

Generalized lot sentencing rule for estimating the value of production lot for sale

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Article ID: iaor20162698
Volume: 67
Issue: 7
Start Page Number: 982
End Page Number: 988
Publication Date: Jul 2016
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: production
Abstract:

In the traditional lot sentencing rule, a buyer arrives to one of two decisions regarding lot disposition; either accept or reject a lot. However, it is more appropriate to consider choices between those two extreme decisions. A clear case where the traditional lot sentencing rule is not flexible is when a buyer purchases a lot from an English auction. In this paper, we propose a model that helps a buyer in estimating the value of a production lot. This model can be used by a bidder before the bidding process starts to estimate the value of an auctioned lot. The model provides an action plan that includes the estimated acquisition cost as a function of the number of defective items found in a random sample. Unlike the traditional lot sentencing rule, the proposed rule is more flexible and provides buyers with wider range of possible actions.

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