The Relevance of Costs in Operations Research

Malcolm W. Hoag
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Malcolm W. Hoag: The Rand Corporation, Santa Monica, California

Operations Research, 1956, vol. 4, issue 4, 448-459

Abstract: Operations research may be divided into studies in which (1) costs are largely irrelevant, because the problem is the maximizing of one objective subject to specific fixed constraints, (2) a measure of real cost internal to the analysis is required, because multiple objectives compete for specific inputs whose supplies are fixed, and (3) real costs must be approximated by money costs, because the form and amount of many inputs can be altered. The scope of the analysis undertaken and the time available for adjustment of the operations in question determine into which group a particular study falls. As an illustration, the context of a hypothetical allocation problem is changed to make it fall successively into each group. Gross misuse of cost measures can result from a failure of operations analysts to discriminate among these groups and to apply tests of efficiency appropriate to each.

Date: 1956
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