Abstract
We study the quality ranking of different information structures. In a unified setting, we present eight representations of essentially the same notion that may arise in distinct literatures, and also establish the intricate relationships among them. The forms that are less familiar to researchers turn out to be more relevant to the operations management context. We also relate the information structure ranking to concepts often invoked in operations management literature, such as advance demand information and decision postponement. Using some of the established relations, we argue for building a cross-docking facility as close as possible to the distribution centers it serves.
Highlights
It has been well accepted in operations management (OM) literature that better information leads to better decision making
We summarize our main contributions in the following: (a) the formulation of general conditions expressing information quality ranking that are suitable for OM studies; (b) the establishment of links among various conditions for the notion of information quality ranking; (c) the development of the Bayesian dual, a useful tool for obtaining various virtual equivalences between different forms of the same notion; and (d) the clarification of the inter-connectivity among different forms and concepts that were previously scattered in the statistics, economics, and OM literature
We have introduced eight conditions, (I), (II), (II’), (III), (III’), (IV), (IV’), and (V), of the notion of information structure I1 being less informative than information structure I2, or I1 ≤I I2
Summary
It has been well accepted in operations management (OM) literature that better information leads to better decision making. Our main result concerns the fact that better information leads to better decisions, as expressed by the following condition (II): For any action space Γand any utility function f : Ω × Γ → R, we have f1∗ ≤ f2∗.
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