managing strategic inventories via manufacturer to consumer rebates manufacturer to consumer rebates are a staple of modern supply chains such rebates are typically viewed as a means of price discrimination because of partial redemption by consumers however the proliferation of universally redeemed instant rebates suggests the practice may be motivated by additional considerations an issue we tackle in this paper our results demonstrate that consumer rebates can be particularly useful when a supply chain encounters inefficiencies stemming from strategic inventory buildup by retailers wary of high wholesale prices a retailer may hold excess inventory to convey a lower willingness to pay in future interactions and thereby strategically undercut future wholesale prices as a retaliatory consequence the manufacturer sets high near term wholesale prices the pull promotion from consumer rebates encourages more timely retail sales and in doing so undercuts but does not eliminate the retailer s strategic inventories in other words the introduction of consumer rebates can serve as an enticement for retailers to sell not just for consumers to buy perhaps surprisingly we find that the manufacturer retailer and consumers alike all benefit from the use of rebates this despite the fact that the manufacturer uses the rebates in self interest and as a strategic weapon this paper was accepted by yossi aviv operations management

manufacturers channel structures when selling asymmetric competing products abstract manufacturers often face the fundamental channel structure decision namely whether to sell their products directly to consumers or indirectly through an intermediary to address this issue extensive research has analyzed equilibrium channel structures for competing equally substitutable products however in reality many competing products are asymmetric in both substitutability and brand equity in this paper we study how these two asymmetric characteristics affect the equilibrium channel structures of manufacturers selling competing products following some recent studies we adopt a refined consumer demand model derived from the representative consumer utility function based on this model we examine three possible types of competition between the two supply chains cournot quantity competition bertrand price competition and bertrand cournot competition we find that brand equity substitutability as well as the type of competition all play important roles in determining the equilibrium channel structures specifically in equilibrium a manufacturer always sells directly when its rival competes on quantity moreover when there is sufficient asymmetry in either brand equity or substitutability manufacturers tend to sell directly our results demonstrate that the benefits of selling indirectly shown in previous studies depend critically on the assumptions of equally substitutable products and bertrand competition

analyzing the effects of insuring health risks on the trade off between short run insurance benefits vs long run incentive costs this paper constructs a dynamic model of health insurance to evaluate the short and long run effects of policies that prevent firms from conditioning wages on health conditions of their workers and that prevent health insurance companies from charging individuals with adverse health conditions higher insurance premia our study is motivated by recent us legislation that has tightened regulations on wage discrimination against workers with poorer health status americans with disability act of 2009 ada and ada amendments act of 2008 adaaa and that will prohibit health insurance companies from charging different premiums for workers of different health status starting in 2014 patient protection and affordable care act ppaca in the model a trade off arises between the static gains from better insurance against poor health induced by these policies and their adverse dynamic incentive effects on household efforts to lead a healthy life using household panel data from the psid we estimate and calibrate the model and then use it to evaluate the static and dynamic consequences of no wage discrimination and no prior conditions laws for the evolution of the cross sectional health and consumption distribution of a cohort of households as well as ex ante lifetime utility of a typical member of this cohort in our quantitative analysis we find that although a combination of both policies is effective in providing full consumption insurance period by period it is suboptimal to introduce both policies jointly since such policy innovation induces a more rapid deterioration of the cohort health distribution over time this is due to the fact that combination of both laws severely undermines the incentives to lead healthier lives the resulting negative effects on health outcomes in society more than offset the static gains from better consumption insurance so that expected discounted lifetime utility is lower under both policies relative to only implementing wage nondiscrimination legislation

does paternity leave reduce fertility abstract we find that the introduction of two weeks of paid paternity leave in spain in 2007 led to delays in subsequent fertility following a regression discontinuity design and using rich administrative data we show that parents who were just entitled to the new paternity leave took longer to have another child compared to just ineligible parents we also show that older eligible couples were less likely to have an additional child within the following six years after the introduction of the reform we provide evidence in support of two potentially complementary channels behind the negative effects on subsequent fertility first fathers increasing involvement in childcare led to higher labor force attachment among mothers this may have raised the opportunity cost of an additional child we also find that men reported lower desired fertility after the reform possibly due to their increased awareness of the costs of childrearing or to a shift in preferences from child quantity to quality

strategic information management under leakage in a supply chain the importance of material flow management for a profit maximizing firm has been well articulated in the supply chain literature we demonstrate in our analytical model that a firm must also actively manage information flows within the supply chain which translates to controlling what it knows as well as what its competitors and suppliers know in our model of horizontal competition between an informed and an uninformed firm with a common upstream supplier material and information flows intersect through leakage of demand order information to unintended recipients as a result the informed firm s drive to control information flows within the supply chain can trigger operational losses through material flow distortion these losses can be so severe that the firm may prefer not to acquire information even when it is costless to do so our results underscore the importance of strategic information management actively managing the supply chain s information flows and making trade offs with material flows where appropriate to maximize profits

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

multi period modeling of two way price commitment under price dependent demand abstract this paper examines the use of price commitment policies in dynamic contracting in multiple period finite time horizons two specific forms of price commitment are considered one on the part of the retailer through a retail fixed markup contract and one on the part of the manufacturer through a price protection contract optimal policies for each form of price commitment are analytically derived as are optimal policies for the traditional price only and centralized supply chain scenarios that we use as comparisons we prove that optimal retail price and order size solutions exist in each period under the assumption of non increasing price dependent demand we show that the existence of retailer inventory between periods causes the optimal policies to differ from a static single period model further we show that a supplier offers a price protection policy as a signal to the retailer to resolve the gaming that naturally occurs under price only this effectively decouples the multi period dynamic contracting setting into repeated single period scenarios however the resulting behavior can actually inhibit supply chain performance on the retail commitment side we find that retail fixed markup policies are quite effective in improving supply chain efficiency we show that such policies can lead to pareto improvement over price only contracts and can even coordinate the supply chain in some situations

u s tax policy and health insurance demand can a regressive policy improve welfare abstract the u s tax policy on health insurance is regressive because it subsidizes only those offered group insurance through their employers who also tend to have a relatively high income moreover the subsidy takes the form of deductions from the progressive income tax system giving high income earners a larger subsidy to understand the effect of the policy we construct a dynamic general equilibrium model with heterogenous agents and an endogenous demand for health insurance a complete removal of the subsidy may lead to a partial collapse of the group insurance market reduce the insurance coverage and deteriorate welfare there is however room for improving the coverage and welfare by extending a refundable credit to the individual insurance market

health care reform or more affordable health care this article investigates the impact on the u s economy of making health care more affordable we compare health care cost reductions with the patient protection and affordable care act aca using a rich life cycle general equilibrium model with heterogeneous agents we evaluate a wide range of cost reductions ranging from 0 64 realistic and feasible to 29 5 equivalence with oecd our results show that the aca is more effective in reducing uninsured population than all cost reductions considered this result holds throughout the life cycle and for the most fragile part of the population the poorest the less educated and those with bad health realistic and feasible cost reductions are less welfare improving than the aca the increase of welfare induced by the reform is around 7 8 times higher than the increase provided by cost reductions besides the poorer are more benefited than the richer after the reform while the opposite occurs after cost reductions finally to obtain the same welfare increase of the aca medical costs have to decrease by 5 21 a very hard task these results provide support for the aca against opponents who might present cost reductions as alternatives

the cyclical behavior of strategic inventories this paper presents a model in which inventories are used by a duopoly to deter deviations from an implicitly collusive arrangement higher inventories allow firms to punish cheaters more strongly and can thus help to maintain collusion we show that when demand is high the incentive to deviate increases so that increases in inventories may be optimal for the duopoly this rationalizes the observed positive correlation between inventories and sales in our empirical section we show that as our model predicts this correlation is more important in concentrated industries we also provide several examples where inventories have been a factor in cartel behavior

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

demand uncertainty inventories and resale price maintenance we show that a manufacturer facing uncertain demand and selling through a competitive retail market may wish to support adequate retail inventories by preventing the emergence of discount retailers in our model discounters offer low prices made possible by low probability of being saddled with unsold inventories in the event of slack demand full price retailers are compensated for a higher probability of unsold inventories by a higher retail price when they sell we show that preventing discounting increases the manufacturer s wholesale demand and profits and we delineate demand conditions under which equilibrium inventory holding and consumer welfare increase

insurance and opportunities a welfare analysis of labor market risk abstract using a model with constant relative risk aversion preferences endogenous labor supply and partial insurance against idiosyncratic wage risk this paper provides an analytical characterization of three welfare effects a the welfare effect of a rise in wage dispersion b the welfare gain from completing markets and c the welfare effect from eliminating risk the analysis reveals an important trade off for these welfare calculations on the one hand higher wage uncertainty increases the cost associated with missing insurance markets on the other hand greater wage dispersion presents opportunities to raise aggregate productivity by concentrating market work among more productive workers welfare effects can be expressed in terms of the underlying parameters defining preferences and wage risk or alternatively in terms of changes in observable second moments of the joint distribution over individual wages consumption and hours

health insurance reform the impact of a medicare buy in abstract the steady state general equilibrium and welfare consequences of a medicare buy in program optional for those aged 55 64 is evaluated in a calibrated life cycle economy with incomplete markets incomplete markets and adverse selection create a potential welfare improving role for health insurance reform we find that adverse selection eliminates any market for a medicare buy in if it is offered as an unsubsidized option to individual private health insurance the subsidy needed to bring the number of uninsured to less than 5 percent of the target population could be financed by an increase in the labor income tax rate of just 0 03 0 18 percent depending on how the program is implemented

decentralized procurement in light of strategic inventories the centralization versus decentralization choice is perhaps the quintessential organizational structure decision in the operations realm this choice is particularly critical when it comes to the procurement function why firms may opt to decentralize procurement has been often studied and confirmed to be a multifaceted choice this paper complements existing studies by detailing the trade offs in the centralization versus decentralization decision in light of firms strategic use of inventories to influence supplier pricing in particular we demonstrate that a firm s decision to cede procurement choices to its individual divisions can help moderate inventory levels and provide a natural salve on supply chain frictions this paper was accepted by serguei netessine operations management

the role of obsolescence and inventory costs in providing commitment this paper modifies the cournot and stackelberg models to allow the firms to sell less than they have produced and to store the unsold portion of their output as inventory even if one of the firms can choose its output before the other if it is costless to carry unsold goods forward then the cournot outcome emerges we show however that costs of carrying the inventory forward endow the firms with a limited degree of commitment to sell what they have produced this partially restores the first mover advantage if the firms choose their outputs simultaneously the cournot outcome emerges and has locally consistent conjectures

the impact of employer provided health insurance on dynamic employment transitions we estimate the impact of employer provided health insurance ephi on the job mobility of males over time using a dynamic empirical model that accounts for unobserved heterogeneity previous studies of job lock reach different conclusions about possible distortions in labor mobility stemming from an employment based health insurance system a few authors find no evidence of job lock although most find reductions in the mobility of insured workers of between 20 and 40 percent we use data from the national longitudinal survey of youth which includes variables describing the health insurance an individual holds as well as whether he is offered insurance by his employer this additional information allows us to model the latent individual characteristics that are correlated with the offer of ephi the acceptance of ephi and employment transitions our results provide an estimate of job lock unbiased through correlation with positive job characteristics and individual specific turnover propensity we find no evidence of job lock among married males and produce small estimates of job lock among unmarried males of between 10 and 15 percent

the effects of health insurance and self insurance on retirement behavior this paper provides an empirical analysis of the effects of employer provided health insurance medicare and social security on retirement behavior using data from the health and retirement study we estimate a dynamic programming model of retirement that accounts for both saving and uncertain medical expenses our results suggest that medicare is important for understanding retirement behavior and that uncertainty and saving are both important for understanding the labor supply responses to medicare half the value placed by a typical worker on his employer provided health insurance is the value of reduced medical expense risk raising the medicare eligibility age from 65 to 67 leads individuals to work an additional 0 074 years over ages 60 69 in comparison eliminating 2 years worth of social security benefits increases years of work by 0 076 years

marketing driven channel coordination with revenue sharing contracts under price promotion to end customers this paper explores the equilibrium behavior of a basic supplier retailer distribution channel with and without revenue sharing contracts under price promotion to end customers three types of promotional demand patterns characterized by different features of dynamic price sensitivity are considered to rationalize price promotional effects on end customer demands under such a retail price promotion scheme this work develops a basic model to investigate decentralized channel members equilibrium decisions in pricing and logistics operations using a two stage stackelberg game approach extending from the basic model this work further derives the equilibrium solutions of the dyadic members under channel coordination with revenue sharing contracts analytical results show that under certain conditions both the supplier and retailer can gain more profits through revenue sharing contracts by means of appropriate promotional pricing strategies moreover the supplier should provide additional economic incentives to the retailer furthermore a counter profit revenue sharing chain effect is found in the illustrative examples such a phenomenon infers that the more the retailer requests to share from a unit of sale the more it may lose under the revenue sharing supply chain coordination scheme

labor supply elasticity and social security reform abstract previous literature on social security reform has used a variety of period utility functions and calibrated values for the intertemporal elasticity of substitution ies in labor in this paper we show that the effects of social security reforms on aggregate labor supply are invariant to plausible values of the ies but the effect of such reforms on the profile of hours over the life cycle is highly sensitive to the ies we first establish these results analytically in a simple partial equilibrium setting and then demonstrate their robustness in a general equilibrium model calibrated to match key u s macroeconomic indicators we find that the aggregate effects are similar regardless of the wide range of the values of ies used in calibrated economies however social security reform leads to a large reallocation of hours worked over the life cycle from early years to later working years and the size of this reallocation significantly increases with the ies

vertical contracts in a supply chain and the bullwhip effect this paper shows that decentralized supply chains in which upstream firms use linear wholesale prices may experience lower upstream production and downstream sales volatility than vertically inte

strategic inventories in vertical contracts classical reasons for carrying inventory include fixed nonlinear production or procurement costs lead times nonstationary or uncertain supply demand and capacity constraints the last decade has seen active research in supply chain coordination focusing on the role of incentive contracts to achieve first best levels of inventory an extensive literature in industrial organization that studies incentives for vertical controls largely ignores the effect of inventories does the ability to carry inventory influence the problem of vertical control conversely can inventories arise purely due to incentive effects this paper explicitly considers both incentives and inventories and their interplay in a dynamic model of an upstream firm supplier and a downstream firm buyer who can carry inventories in our model none of the classical reasons for carrying inventory exists however as we prove the buyer s optimal strategy in equilibrium is to carry inventories and the supplier is unable to prevent

comment managing channel profits comment in a recent paper in this journal jeuland and shugan jeuland a s shugan 1983 managing channel profits marketing sci 2 summer 239 272 proposed a quantity discount schedule as a way of coordinating a channel as they put it on p 253 of their paper a quantity discount schedule which would fix the retailer s and hence the manufacturer s profits to some fixed linear function of total channel profits would lead the channel to maximize profits the purpose of this note is to show that a quantity discount schedule is not necessary for channel coordination

sourcing strategies and supplier incentives for short life cycle goods multiple sourcing with quick response has been recognized as a useful tool to manage demand risk for short life cycle goods however general wisdom has traditionally ignored the effect of these practices on supplier incentives in this paper we find that when suppliers make pricing decisions dual sourcing does not always lead to higher supply chain efficiency or buyer profits as compared to single sourcing this loss takes place when suppliers commit to prices up front before any possible forecast change but not when they delay the price quotes after demand forecasts have been updated specifically with up front price commitment dual sourcing leads to inflation of supplier prices because expensive suppliers will still receive part of the business if they are sufficiently quick thus when supplier prices are endogenous double marginalization may offset the additional buyer profit enabled by higher ordering flexibility in contrast with delayed price quotes a buyer will find dual sourcing benefic

an equilibrium model of health insurance provision and wage determination we investigate the effect of employer provided health insurance on job mobility rates and economic welfare using a search matching and bargaining framework in our model health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee the resulting equilibrium is one in which not all employment matches are covered by health insurance wages at jobs providing health insurance are larger in a stochastic sense than those at jobs without health insurance and workers at jobs with health insurance are less likely to leave those jobs even after conditioning on the wage rate we estimate the model using the 1996 panel of the survey of income and program participation and find that the employer provided health insurance system does not lead to any serious inefficiencies in mobility decisions

cost of business cycles with indivisibilities and liquidity constraints it is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk in this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles two versions of incomplete insurance markets are considered and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

population aging health care and fiscal policy reform the challenges for japan we construct a transition analysis based on a general equilibrium life cycle model to investigate the effects of aging and we evaluate various policy alternatives designed to lessen the negative influence of aging in particular we analyze reforms of insurance benefits and tax financing tools that were recently the focus of a great amount of attention and debate in japan because of the tense financial situation there we show that although the potential reforms improve the welfare of future generations the political implementation of such reforms is difficult because of the large welfare costs for the current population our analysis suggests that a gradual reform with an intergenerational redistribution will be more politically implementable than an immediate reform

channel coordination and quantity discounts this paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees both the annual demand rate and the operating cost including the purchase ordering and inventory holding costs depend on the joint decision policy employed this paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination it is shown that the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination furthermore it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization the analyses of the general models are illustrated by specific analytical results obtained for a given demand function