Incomplete contracting and target‐cost pricing

Procurement of advanced technology defence equipment requires appropriate contractual arrangements to achieve efficient R&D investments. This paper analyses the optimality of target‐cost and fixed price contracts and shows that target‐cost pricing can achieve a first best where both fixed‐price contracts and cost reimbursement fail to do so. The main message of this paper is that in incomplete contracting optimality may sometimes be achieved by arrangements which combine several formulae which, individually, would fail to achieve efficiency.     

A queueing system with vacations after N services

This article is devoted to the study of an M/G/1 queue with a particular vacation discipline. The server is due to take a vacation as soon as it has served exactly N customers since the end of the previous vacation. N may be either a constant or a random variable. If the system becomes empty before the server has served N customers, then it stays idle until the next customer arrival. Such a vacation discipline arises, for example, in production systems and in order picking in warehouses. We determine the joint transform of the length of a visit period and the number of customers in the system at the end of that period. We also derive the generating function of the number of customers at a random instant, and the Laplace–Stieltjes transform of the delay of a customer. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 646–658, 2015