Generalized lot sentencing rule for estimating the value of production lot for sale

Mohammed A Darwish and Fawaz Abdulmalek
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Mohammed A Darwish: Kuwait University, Safat, Kuwait
Fawaz Abdulmalek: Kuwait University, Safat, Kuwait

Journal of the Operational Research Society, 2016, vol. 67, issue 7, 982-988

Abstract: In the traditional lot sentencing rule, a buyer arrives to one of two decisions regarding lot disposition; either accept or reject a lot. However, it is more appropriate to consider choices between those two extreme decisions. A clear case where the traditional lot sentencing rule is not flexible is when a buyer purchases a lot from an English auction. In this paper, we propose a model that helps a buyer in estimating the value of a production lot. This model can be used by a bidder before the bidding process starts to estimate the value of an auctioned lot. The model provides an action plan that includes the estimated acquisition cost as a function of the number of defective items found in a random sample. Unlike the traditional lot sentencing rule, the proposed rule is more flexible and provides buyers with wider range of possible actions.

Date: 2016
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