Team decision models of an inventory supply organization

Abstract

AbstractWhen uncertainty is a consideration in the normative analysis of decisions and information within organizations, “best” programs of decision rules depend on the information structure which pertains to the organization. Under different information structures, different decision rule programs are optimal relative to the prevailing criteria of organization performance.Propositions from team decision theory may be employed advantageously to resolve behavioral issues in the formal description of organizational decision processes. In specifying the information structure of an organization within the analysis of team problems it becomes useful to distinguish between components of the data generating process and the information system. An information system can be described completely in terms of (1) the space of states of the world, {Xi} = X; (2) the space of information, {Zk} = Z; and (3) the system likelihood function or conditional probability of each item of information, Zk, given the state, Xi, for each Zk ε Z and Xi ε X. The framework of applied statistical decision theory provides an operational procedure for the normative analysis of alternative decision rule programs and information systems.These considerations are illustrated for a simple logistics organization with operating costs given by a constrained asymmetric linear function of inventory and demand. In particular, both normal and extensive form analyses of the team decision problem are detailed under several logistics information systems.