Decision Making & Negotiations

Many primary care offices and other medical practices regularly experience long backlogs for appointments. These backlogs are exacerbated by a significant level of last-minute cancellations or "no-shows," which have the effect of wasting capacity. In this paper, we conceptualize such an appointment system as a single-server queueing system in which customers who are about to enter service have a state-dependent probability of not being served and may rejoin the queue.

The Institute of Medicine identified "timeliness" as one of six key "aims for improvement" in its most recent report on quality. Yet patient delays remain prevalent, resulting in dissatisfaction, adverse clinical consequences, and often, higher costs. This tutorial describes several areas in which patients routinely experience significant and potentially dangerous delays and presents operations research (OR) models that have been developed to help reduce these delays, often at little or no cost.

This special issue of Production and Operations Management offers a sample of ongoing research that focuses currently on the services industries. The articles selected cover a spectrum of application areas as well as methodologies.

We consider a revenue management, network capacity control problem in a setting where heterogeneous customers choose among the various products offered by a firm (e.g., different flight times, fare classes, and/or routings). Customers may therefore substitute if their preferred products are not offered. These individual customer choice decisions are modeled as a very general stochastic sequence of customers, each of whom has an ordered list of preferences. Minimal assumptions are made about the statistical properties of this demand sequence.

Volatility is the key variable in option pricing models and for risk management in general. Not surprisingly, this has led to the recognition that volatility uncertainty is an important risk factor. This realization, in turn, has given rise to derivative instruments tied to volatility, such as variance swaps, volatility swaps, and options on both variance and volatility, which are specifically designed to help manage this risk. To price these contracts, a model is needed for the volatility process.

We analyze a planning model for a firm or public organization that needs to cover uncertain demand for a given item by procuring supplies from multiple sources. Each source faces a random yield factor with a general probability distribution. The model considers a single demand season. All supplies need to be ordered before the start of the season. The planning problem amounts to selecting which of the given set of suppliers to retain, and how much to order from each, so as to minimize total procurement costs while ensuring that the uncertain demand is met with a given probability.

This paper empirically investigates directors' ownership in the mutual fund industry. Our results show that, contrary to anecdotal evidence, a significant portion of directors hold shares in the funds they oversee. Ownership patterns are broadly consistent with an optimal contracting equilibrium. That is, ownership is positively and significantly correlated with most variables that are predicted to indicate greater value from directors' monitoring. For example, directors' ownership is more prevalent in actively managed funds and in funds with lower institutional ownership.

Using a large hand-collected data set from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. Hedge funds seldom seek control and in most cases are nonconfrontational. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism.

Hedge fund activism is a new form of investment strategy. Using a large handcollected data set from 2001 to 2006 we find that activist hedge funds in the U.S. propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal stock return upon announcement of activism is approximately seven percent, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism.