Research Article
Feb 1977
Expected Profit Selling Goods of Variable Quality
Publication: Journal of the Engineering Mechanics Division
Volume 103, Issue 1
Abstract
The expected profit of a supplier of goods (contractor) is analyzed for the general situation where renumeration is a function of the quality of the goods and this quality cannot be precisely controlled. It is assumed that the supplier can choose the mean value, and possibly the coefficient of variation, of the random quality and it is shown how he can choose the values of these parameters in order to maximize his own profit. The minimum price at which he could bid the job without expecting to lose money is also considered. Several pricing policies are considered, including the conventional policy of a constant price for all units accepted. For each policy graphical results are presented which allow simple computation of the optimum values of production parameters and of the minimum bid price. An example illustrates application of some of the results to a situation where the product is cast-in-place concrete.
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Information
Published In
Journal of the Engineering Mechanics Division
Volume 103 • Issue 1 • February 1977
Pages: 67 - 78
Copyright
© 1977 American Society of Civil Engineers.
History
Published in print: Feb 1977
Published online: Feb 3, 2021
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Authors
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Loren D. Lutes, M.ASCE
Assoc. Prof. of Civ. Engrg., Rice Univ., Houston, Tex.
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ASCE Library Cards let you download journal articles, proceedings papers, and available book chapters across the entire ASCE Library platform. ASCE Library Cards remain active for 24 months or until all downloads are used. Note: This content will be debited as one download at time of checkout.
Terms of Use: ASCE Library Cards are for individual, personal use only. Reselling, republishing, or forwarding the materials to libraries or reading rooms is prohibited.
Terms of Use: ASCE Library Cards are for individual, personal use only. Reselling, republishing, or forwarding the materials to libraries or reading rooms is prohibited.