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The silver lining effect predicts that segregating a small gain from a larger loss results in greater psychological value than does integrating them into a smaller loss. Using a generic prospect theory value function, we formalize this effect and derive conditions under which it should occur. We show analytically that if the gain is smaller than a certain threshold, segregation is optimal. This threshold increases with the size of the loss and decreases with the degree of loss aversion of the decision maker. Our formal analysis results in a set of predictions suggesting that the silver lining effect is more likely to occur when (i) the gain is smaller (for a given loss), (ii) the loss is larger (for a given gain), and (iii) the decision maker is less loss averse. We test and confirm these predictions in two studies of preferences, both in a nonmonetary and a monetary setting, analyzing the data in a hierarchical Bayesian framework.

© 2009 INFORMS

British artist Damien Hirst is both controversial and successful. Jörg Reckhenrich, Jamie Anderson and Martin Kupp suggest that his innovative approach to life and work demonstrate strategies useful to organizations.

© 2009 The Author Journal compilation © 2009 London Business School

Industrial product service systems (IPS²) are required to meet current customer needs in order to provide solutions to current customer problems. Furthermore, adaptability to changing customer decision drivers is required in order to account for customers' preference changes over time. The purpose of this paper is to present an approach where customer preference drivers for different IPS2 are identified and their directions analyzed.

With permission of Emerald

This article investigates the Farlie-Gumbel-Morgenstern class of models for exchangeable continuous data. We show how the model specification can account for both individual and cluster level covariates, we derive insights from comparisons with the multivariate normal distribution, and we discuss maximum likelihood inference when a sample of independent clusters of varying sizes is available. We propose a method for maximum likelihood estimation which is an alternative to direct numerical maximization of the likelihood that sometimes exhibits non-convergence problems. We describe an algorithm for generating samples from the exchangeable multivariate Farlie-Gumbel-Morgenstern distribution with any marginals, using the structural properties of the distribution. Finally, we present the results of a simulation study designed to assess the properties of the maximum likelihood estimators, and we illustrate the use of the FGM distributions with the analysis of a small data set from a developmental toxicity study.

With permission of Elsevier

Nonprofit firms sometimes engage in for-profit activities for the purpose of generating revenue to subsidize their mission activities. The organization is then confronted with a consumption versus investment trade-off, where investment corresponds to providing capacity for revenue customers, and consumption corresponds to serving mission customers. Exemplary of this approach are the Aravind Eye Hospitals in India, where profitable paying hospitals are used to subsidize care at free hospitals. We model this problem as a multiperiod stochastic dynamic program. In each period, the organization must decide how much of the current assets should be invested in revenue-customer service capacity, and at what price the service should be sold. We provide sufficient conditions under which the optimal capacity and pricing decisions are of threshold type. Similar results are derived when the selling price is fixed, but the banking of assets from one period to the next is allowed. We compare the performance of the optimal threshold policy with heuristics that may be more appealing to managers of nonprofit organizations, and we assess the value of banking and of dynamic pricing through numerical experiments.

© 2009 INFORMS

Companies from industrialized nations have faced with the threat of competition from low-cost countries. We suggest Industrial Product Service Systems (IPS²) as a possible answer. Our article has two main aims. We establish a framework for designing an initial IPS² which meets current customer and market requirements. Building on this, we broaden our focus to include requirements induced by subsequent changes. We propose a combination of the Net Present Value Approach and the Real Options Approach as a means of determining the quantified value of an IPS² for an individual customer over its life cycle.

With permission of Elsevier