Qualitative Properties of Profit-Maximizing K-Out-of-N Systems Subject to Two Kinds of Failures

IEEE Transactions on Reliability, Volume 37, Number 5, December 1988, pages 515-520

Yale University Economic Growth Center Discussion Paper No. 559

22 Pages Posted: 27 Jun 2012

See all articles by Raaj Kumar Sah

Raaj Kumar Sah

University of Chicago

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: June 1, 1988

Abstract

This paper derives several properties of the optimal k-out-of-n: G systems where: (i) the i.i.d. components can be, with a pre-specified frequency, in one of two possible modes, (ii) components are subject to failures in each of the two modes, and (iii) the costs of two kinds of system's failures are not necessarily the same. A characterization of the optimal k which maximizes the system's expected profit is obtained (a special case of this optimization criterion is the maximization of the system's reliability). We show how one can predict, based directly on the parameters of the system, whether the optimal k is smaller or larger than one-half of n. Also, the directions of change in the optimal k resulting from changes in the system's parameters are ascertained.

Suggested Citation

Sah, Raaj Kumar and Stiglitz, Joseph E., Qualitative Properties of Profit-Maximizing K-Out-of-N Systems Subject to Two Kinds of Failures (June 1, 1988). IEEE Transactions on Reliability, Volume 37, Number 5, December 1988, pages 515-520; Yale University Economic Growth Center Discussion Paper No. 559. Available at SSRN: https://ssrn.com/abstract=2085855

Raaj Kumar Sah (Contact Author)

University of Chicago ( email )

Chicago, IL 60637
United States
+1 773 288 1117 (Phone)

Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

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(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

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