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Stochastic comparisons in production yield management. (English) Zbl 1165.90436
Summary: Manufacturing firms routinely commit resources to increase yield rates through product- and process-improvement initiatives. Champions of such yield-improvement projects may assume that stochastically larger yield rates are beneficial. In this note, we show that this need not hold, even when the contingent production lot sizes are chosen optimally. We employ stochastic comparison techniques to show that a yield rate that is smaller in the convex order ensures higher expected profit, and we provide a distribution-free bound on the size of increase in expected profit. We also identify properties of yield-rate distributions that do make stochastically larger yield rates beneficial.
Reviewer: Reviewer (Berlin)

90B30 Production models
91B38 Production theory, theory of the firm
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