Stochastic Comparisons in Production Yield Management

Diwakar Gupta () and William L. Cooper ()
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Diwakar Gupta: Department of Mechanical Engineering, University of Minnesota, Minneapolis, Minnesota 55455
William L. Cooper: Department of Mechanical Engineering, University of Minnesota, Minneapolis, Minnesota 55455

Operations Research, 2005, vol. 53, issue 2, 377-384

Abstract: 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.

Keywords: random yield; stochastic order relations (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (30)

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