The value of reliability

Mogens Fosgerau () and Anders Karlström

MPRA Paper from University Library of Munich, Germany

Abstract: We derive the value of reliability in the scheduling of an activity of random duration, such as travel under congested conditions. We show that the minimal expected cost is linear in the mean and standard deviation of duration, regardless of the form of the standardized distribution of durations. This insight provides a unification of the scheduling model and models that include the standard deviation of duration directly as an argument in the cost or utility function. The results generalize approximately to the case where the mean and standard deviation of duration depend on the starting time. Empirical illustration is provided.

Keywords: Welfare; Random duration; Time; Scheduling; Reliability; Variability (search for similar items in EconPapers)
JEL-codes: D0 D81 D8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
Date: 2007-11-13
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:5733

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