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The economics of decision making in the new manufacturing firm
Author(s) -
McNamara John R.
Publication year - 1992
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090130403
Subject(s) - revenue , value (mathematics) , order (exchange) , economics , heuristic , variety (cybernetics) , microeconomics , process (computing) , decision rule , optimal decision , theory of the firm , industrial organization , computer science , mathematics , mathematical optimization , finance , machine learning , artificial intelligence , operating system , decision tree
Decision making in a modern manufacturing firm producing a variety of products while meeting order deadlines appears at first to have little basis in the economic Theory of the Firm. It is shown that optimal budget allocations, the fractions of revenue expended on inputs, are likely to remain constant for a succession of orders for each of a family of products, thus simplifying the decision process. Well‐known heuristic decision rules may not only have a sound basis in economic theory but are evidently the best way to incorporate economic logic into a stream of fast‐moving decisions. The discussion is extended to an explanation of the economic value of decision making to the firm, and why this value is usually assumed to be zero in theory.