covered interest rate arbitrage in the interwar period and the keynes einzig conjecture keynes 1923 conjectured that deviations from covered interest rate parity would not be arbitraged unless a profit of at least a half of one percent on an annualized basis was available and that larger deviations would still be moderately persistent because of less than perfect elasticity of supply of arbitrage funds this two part conjecture was given further emphasis by other writers on this period notably einzig 1937 we apply nonlinear econometric techniques to a previously unexploited weekly data base for the 1920s london and new york markets and find strong support for the conjecture

strategic capacity rationing to induce early purchases dynamic pricing offers the potential to increase revenues at the same time it creates an incentive for customers to strategize over the timing of their purchases a firm should ideally account for this behavior when making its pricing and stocking decisions in particular we investigate whether it is optimal for a firm to create rationing risk by deliberately understocking products then the resulting threat of shortages creates an incentive for customers to purchase early at higher prices but when does such a strategy make sense if it is profitable to create shortages what is the optimal amount of rationing risk to create we develop a stylized model to study this problem in our model customers have heterogeneous valuations for the firm s product and face declining prices over two periods customers are assumed to have identical risk preferences and know the price path and fill rate in each period via its capacity choice the firm is able to control the fill rate and hence the rationing risk faced by customers customers behave strategically and weigh the payoff of immediate purchases against the expected payoff of delaying their purchases we analyze the capacity choice that maximizes the firm s profits first we consider a monopoly market and characterize conditions under which rationing is optimal we examine how the optimal amount of rationing is affected by the magnitude of price changes over time and the degree of risk aversion among customers we then analyze an oligopoly version of the model and show that competition reduces the firms ability to profit from rationing indeed there exists a critical number of firms beyond which a rationing equilibrium cannot be supported

unequal vulnerability to climate change and the transmission of adverse effects through international trade in this paper we consider the unequal distribution of climate change damages in the world and we examine how the underlying costs can spread from a vulnerable to a non vulnerable country through international trade to focus on such indirect effects we treat this topic in a north south trade overlapping generations model in which the south is vulnerable to the damages entailed by global pollution while the north is not we show that the impact of climate change in the south can be a source of welfare loss for northern consumers in both the short and the long run in the long run an increase in the south s vulnerability can reduce the welfare in the north economy even in the case in which it improves its terms of trade in the short run the south s vulnerability can also represent a source of intergenerational inequity in the north therefore we emphasize the strong economic incentives for non vulnerable and a fortiori less vulnerable economies to reduce the climate change damages on more vulnerable countries

the allocation of inventory risk in a supply chain push pull and advance purchase discount contracts while every firm in a supply chain bears supply risk the cost of insufficient supply some firms may even with wholesale price contracts completely avoid inventory risk the cost of unsold inventory with a push contract there is a single wholesale price and the retailer by ordering his entire supply before the selling season bears all of the supply chain s inventory risk a pull contract also has a single wholesale price but the supplier bears the supply chain s inventory risk because only the supplier holds inventory while the retailer replenishes as needed during the season examples include vendor managed inventory with consignment and drop shipping an advance purchase discount has two wholesale prices a discounted price for inventory purchased before the season and a regular price for replenishments during the selling season advance purchase discounts allow for intermediate allocations of inventory risk the retailer bears the risk on inventory ordered before the season while the supplier bears the risk on any production in excess of that amount this research studies how the allocation of inventory risk via these three types of wholesale price contracts impacts supply chain efficiency the ratio of the supply chain s profit to its maximum profit it is found that the efficiency of a single wholesale price contract is considerably higher than previously thought as long as firms consider both push and pull contracts in other words the literature has exaggerated the value of implementing coordinating contracts i e contracts that achieve 100 efficiency such as buy backs or revenue sharing because coordinating contracts are compared against an inappropriate benchmark often just a push contract furthermore if firms also consider advance purchase discounts which are also simple to administer then the coordination of the supply chain and the arbitrary allocation of its profit is possible several limitations of advance purchase discounts are discussed

information rigidities and the news adjusted output gap a vector autoregressive model of actual output and expected output obtained from surveys is used to test for information rigidities and to provide a characterisation of output dynamics that accommodates these information structures news on actual and expected outputs is decomposed to identify innovations understood to have short lived effects and these are used with the model to derive a news adjusted output gap measure the approach is applied to us data over 1970q1 2014q2 and the new gap measure is shown to provide a good leading indicator of inflation

the benefits of advance booking discount programs model and analysis consider a retailer who sells perishable seasonal products with uncertain demand due to the short sales season and long replenishment lead times associated with such products the retailer is unable to update demand forecasts by using actual sales data generated from the early part of the season and to respond by replenishing stocks during the season to overcome this limitation we examine the case in which the retailer develops a program called the advance booking discount abd program that entices customers to commit to their orders at a discount price prior to the selling season the time between placement and fulfillment of these precommitted orders provides an opportunity for the retailer to update demand forecasts by utilizing information generated from the precommitted orders and to respond by placing a cost effective order at the beginning of the selling season in this paper we evaluate the benefits of the abd program and characterize the optimal discount price that maximizes the retailer s expected profit

climate shocks and international trade evidence from china abstract this paper examines the impacts of climate shocks on international trade in china we find that there are substantial climate effects on exports but only little impacts on imports poorer warmer and non coastal cities suffer more from a warming climate

low carbon development for the least developed countries the global community has to act collectively to halt climate change but such collective action must take into account the development needs of the least developed countries ldcs which are likely to be hit earliest and hardest by climate change the priority of such countries remains poverty alleviation and the achievement of the millennium development goals but the three challenges of limiting climate change adapting to its consequences and reducing poverty have to be faced together this requires ldcs eventually to follow a development path that differs from those trodden by today s industrial countries and emerging market economies there is no room in the long term for high emission economies and high carbon growth is unsustainable given the possible consequences for fossil fuel supplies and climate change impacts

friedman s plucking model of business fluctuations tests and estimates of permanent and transitory components in milton friedman s model output cannot exceed a ceiling level but occasionally is plucked downward by recession implying fluctuations are asymmetric recessions transitory and recessions duration dependent though expansions are not the empirical literature lends support but formal modeling has been absent the econometric model presented here encompasses both plucking and symmetric fluctuations around a stochastic trend we find gdp is well characterized by the plucking model implied recessions correspond to nber reference cycles and no role for symmetric cycles decomposition of the unemployment rate reveals a corresponding asymmetry and timing paths of ceiling output and trend unemployment are presented

weather variations and international trade in this paper i investigate the effect of weather variations in the exporter and importer countries separately as well as a the difference between weather variations in both countries on bilateral trade flows the analysis is done at the country sectoral and product levels worldwide and over the 1992 2014 period i find a negative effect of temperature variations in the exporter country and in the difference between exporter and importer countries on bilateral trade at the country level at the product level both negative and positive effects arise but the negative effect of temperature dominates the temperature effects are on the agricultural and manufacturing sectors especially in the textile and metals sectors i show that possible channels are the impact of temperature on output and labour productivity the negative impacts are larger in exporter countries that are closer to the equator that have lower quality of institutions and that export to more remote countries if countries are able to adapt to climate change the long term effects of temperature variations should be lower than the contemporaneous effect nevertheless my results on the long term effects analysis do not support this hypothesis suggesting no or very low adaptation moreover the negative effect of temperature is persistent and cumulative through several years after the temperature shock concerning precipitation variation effects they are found mainly at the product level with the positive effect dominating for the affected products

long run relations and short run dynamics among coal natural gas and oil prices we examine the long run relations and short run dynamics among the three primary energy prices coal natural gas and crude oil using the annual and monthly us data for the post 1970 period the results are consistent with the view that oil prices are determined globally natural gas prices are determined regionally and coal prices are set by long term contracts

is the persistence of shocks to output asymmetric abstract this paper provides evidence that the persistence of positive shocks to output is not significantly different from the persistence of negative shocks this contrasts the results of beaudry and koop 1993 journal of monetary economics 31 149 163 showing asymmetry in the effects of innovations to gnp an unobserved components model modified to incorporate a threshold process is used to examine gnp as well as industrial production data its ability to discriminate between positive and negative output shocks and separately estimate their enduring effects provides for a more cogent test of symmetry in the persistence of shocks

rain agriculture and tariffs this paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector in a model of strategic trade policy the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous depending on the weight placed by the domestic policy maker on tariff revenue profits and the consumer surplus the more weight placed on domestic profits the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs these findings are robust to alternative assumptions about market structure and the timing of the game using detailed panel data on applied tariffs and rainfall for 70 nations the authors find robust evidence that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports

climate shocks and exports this paper uses international trade data to examine the effects of climate shocks on economic activity we examine panel models relating the annual growth rate of a country s exports in a particular product category to the country s weather in that year we find that a poor country being 1 degree celsius warmer in a given year reduces the growth rate of that country s exports by between 2 0 and 5 7 percentage points with no detectable effects in rich countries we find negative effects of temperature on exports of both agricultural products and light manufacturing products with little apparent effects on heavy industry or raw materials the results confirm large negative effects of temperature on poor countries economies and suggest that temperature affects a much wider range of economic activity than conventionally thought this abstract was borrowed from another version of this item

industrial output fluctuations in developing countries general equilibrium consequences of agricultural productivity shocks abstract this paper shows that a negative shock to agricultural productivity may increase food prices and labor and capital can move away from manufacturing into agriculture to meet the subsistence requirement for food this effect depends on income levels and openness to trade using annual manufacturing data and rainfall shocks as the instrument for crop yields proxy for agricultural productivity i find that an exogenous decline in yield decreases manufacturing output as well as employment and capital investment in manufacturing overall crop yield variation can explain up to 44 of industrial output fluctuations in developing countries rainfall shocks cause 31 of the fluctuations lastly this paper shows that such perverse phenomena in which resources move toward the sector with declining productivity can lead to a significant reduction in aggregate productivity

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

reducing the cost of demand uncertainty through accurate response to early sales traditionally fashion products have incurred high losses due to stockouts and inventory obsolence because long lead times coupled with a concentrated selling season force all or at least most production to be committed before demand information is available under a quick response system lead times are shortened sufficiently to allow a greater portion of production to be scheduled in response to initial demand we model and analyze the decisions required under quick response and give a method for estimating the demand probability distributions needed in our model we applied these procedures with a major fashion skiwear firm and found that cost relative to the current informal response system was reduced by enough to increase profits by 60 relative to the cost that would have been incurred if no response were used optimized response reduces cost by enough to roughly quadruple profits

strategic commitments for an optimal capacity decision under asymmetric forecast information we study the important problem of how to assure credible forecast information sharing between a supplier and a manufacturer the supplier is responsible for acquiring the necessary capacity before receiving an order from the manufacturer who possesses private forecast information for her end product we address how different contracts affect the supplier s capacity decision and hence the profitability of the supplier and the manufacturer we fully develop two contracts and provide explicit formulae to enable credible forecast information sharing the first is a nonlinear capacity reservation contract under which the manufacturer agrees to pay a fee to reserve capacity the second is an advance purchase contract under which the manufacturer is induced to place a firm order before the supplier secures the component capacity used to build the end product these contracts serve a strategic role in information sharing the capacity reservation contract enables the supplier to detect the manufacturer s private forecast information while the advance purchase contract enables the manufacturer to signal her forecast information we show that channel coordination is possible even under asymmetric forecast information by combining the advance purchase contract with an appropriate payback agreement through our structural and numerical results we also show that the degree of forecast information asymmetry and the risk adjusted profit margin are two important drivers that determine supply chain efficiency and which contract to adopt

measuring poverty in a growing world or measuring growth in a poor world the extent to which growth reduces global poverty has been disputed for 30 years although there are better data than ever before controversies are not resolved a major problem is that consumption measured from household surveys which is used to measure poverty grows less rapidly than consumption measured in national accounts in the world as a whole and in large countries particularly india china and the united states in consequence measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries one plausible cause is that richer households are less likely to participate in surveys but growth in the national accounts is also upward biased and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys so it is possible for consumption of the poor to grow less rapidly than national consumption without any increase in measured inequality current statistical procedures in poor

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

efficient supply contracts for fashion goods with forecast updating and two production modes we examine the problem of developing supply contracts that encourage proper coordination of forecast information and production decisions between a manufacturer and distributor of high fashion seasonal products operating in a two mode production environment the first production mode is relatively cheap but requires a long lead time while the second is expensive but offers quick turnaround we focus on contracts of the form w1 w2 b wherewi is the wholesale price offered for production modei andb is a return price offered for items left over at the end of the season we find that such a contract can coordinate the manufacturer and distributor to act in the best interest of the channel the pricing conditions needed to ensure an efficient solution vary depending on the degree of demand forecast improvement between periods and the manufacturer s access to forecast information we also examine whether these conditions ensure a pareto optimal solution with respect to two traditional production settings

advance booking discount programs under retail competition we model a situation in which two retailers consider launching an advance booking discount abd program in this program customers are enticed to precommit their orders at a discount price prior to the regular selling season however these precommitted orders are filled during the selling season while the abd program enables the retailers to lock in a portion of the customer demand and use this demand information to develop more accurate forecasts and supply plans the abd price reduces profit margin we analyze the four possible scenarios wherein each of the two firms offer an abd program or not and establish conditions under which the unique equilibrium calls for launching the abd program at both retailers

exchanging goods and damages the role of trade on the distribution of climate change costs the impacts of climate change vary significantly across world regions whereas tropical and subtropical regions are expected to suffer severely from the effects of climate change the impacts in northern latitudes should remain relatively moderate however regions are not self sufficient and the costs of climate change can spread across regions through international trade i study the international spillover of climate impacts within a regionalised climate sensitive dynamic computable general equilibrium model of the world economy using data from a global climate model shows that the world regions face welfare losses between 0 6 and 2 1 due to climate change i also show that climate change affects terms of trade and sectoral competitiveness by means of a decomposition method the extent of spillover impacts through international trade can be identified spillover impacts significantly affect either positively or negatively the total costs of climate change for a region for regions with low exposure to climate change and high adaptive capacities spillover effects are responsible for a 1 6 of the total cost of climate change

income shocks and hiv in africa we examine how variation in local economic conditions has shaped the aids epidemic in africa using data from over 200 000 individuals across 19 countries we match biomarker data on individuals serostatus to information on local rainfall shocks a large source of income variation for rural households we estimate infection rates in hiv endemic rural areas increase by 11 for every recent drought an effect that is statistically and economically significant income shocks explain up to 20 of variation in hiv prevalence across african countries suggesting existing approaches to hiv prevention could be bolstered by helping households manage income risk better the relationship between income and health has long been of interest to economists and a lengthy literature documents strong linkages between economic conditions and many important health outcomes currie 2009 there has been much less progress however in understanding the economic foundations of the hiv aids epidemic one of the most important global health challenges such an understanding might yield particular dividends in sub saharan africa ssa where over a million people continue to become newly infected with the disease each year unaids 2010 in this article we explore the role of negative income shocks in shaping the

nonlinear permanent temporary decompositions in macroeconomics and finance we suggest a method of decomposing univariate and multivariate nonlinear processes into their permanent and temporary components extending the analysis of beveridge and nelson 1981 and stock and watson 1987 we provide applications in the univariate nonlinear case to recent work on nonlinearities in the us business cycle and in the multivariate nonlinear case to recent work on asymmetric nonlinear adjustment in the term structure of interest rates for the us the business cycle results suggest that the method may be particularly useful in future research on output fluctuations

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

the african growth miracle measures of real consumption based on the ownership of durable goods the quality of housing the health and mortality of children the education of youths and the allocation of female time in the household indicate that sub saharan living standards have for the past two decades been growing about 3 4 3 7 percent per year that is three and a half to four times the rate indicated in international data sets

do recessions permanently change output abstract this paper examines whether negative innovations to gnp are more or less persistent than positive innovations we find that once we allow for the impulse response of gnp to be asymmetric negative innovations to gnp are observed to be much less persistent than positive ones in particular the effect of a recession on the forecast of output is found to be negligible after only eight to twelve quarters while the effect of a positive shock is estimated to be persistent and amplified over time our results may therefore help reconcile two antagonistic views about the nature of business cycle fluctuations

inventories and the three phases of the business cycle this article demonstrates that recessions typically are followed by high growth recovery phases that push output back to its prerecession level thus postwar fluctuations in real output in the united states have consisted of three sequential phases rather than two contractions high growth recoveries and moderate growth periods following recoveries data from before world war ii also exhibit this pattern for the postwar period the three phase pattern is shown to reflect swings in inventory investment and suggests that output fluctuations have an important transitory component the evidence in this article supports delong and summers s output gaps view and friedman s plucking model view of fluctuations

searching for a better proxy for business cycles with supports using us data this study revises the original current depth of recession cdr to prove that the modified cdr mcdr is more suitable as a threshold variable than the cdr we rebuild the cdr indicator and adjust its positive and negative ranges with the estimation results of the threshold autoregressive tar model we construct two tar models utilizing cdr and mcdr as threshold variables respectively estimation and test results of the root mean square error theil s inequality coefficient and the diebold mariano dm 1995 test suggest that mcdr performs better as a threshold variable than cdr

natural disasters and countries exports new insights from a new and an old database this paper is the first to uncover in details the impact of different families of disasters on exports from 1979 to 2000 storms floods earthquakes and changes in temperatures besides our paper is the first to compare in a quasi systematic way the results across the two data sets at hand the standard em dat data and geomet data a newly available data set based on geophysical and meteorological data european economic review 2013 58 18 journal of development economics 2014 111 92 we run series of regressions while accounting progressively for the characteristics of products all traded goods v s agriculture ones the characteristics of the country size level of development and the intensity of the catastrophes when pooling all countries and all types of disasters we do not find any statistical impact on exports but when focusing on each of them separately and on agricultural goods the occurrence of an earthquake appears to reduce exports of about 3 regardless of its location a windstorm shock even when it happens to be very severe has hardly any impact a flood on its side is estimated to reduce export flows of a small country by nearly 3 the effect of changes in temperatures is ambiguous all in all except for temperature related disasters the results are consistent across both data sets em dat and geomet although they appear to be slightly more in line with our expectations in the case of geomet

managing product variety with advance selling and capacity restrictions abstract in this research we analyze the impact of advance selling with price discount on a firms ability to maximize the expected profit the production environment of the firm is characterized by short selling cycle multiple products demand variability and capacity restrictions the advance orders are randomly distributed with the parameters dependent on the discount levels under advance selling the advance orders are used to update the demand forecast of selling season and are delivered at the start of the selling season the problem is modeled as a three stage stochastic non linear programming problem we derive the concavity of the problem under customers willingness to buy in advance our solution methodology comprises the variance reduction technique of antithetic variates that gives credible value of price discount levels for different sets of demand values we also provide sensitivity analysis of the problem parameters to derive insights into the behavior of the expected profit and the benefits due to advance selling under capacity restrictions

the role of asymmetries and regime shifts in the term structure of interest rates we examine the relationship between interest rates of different maturities for the us germany and japan over the period 1982 2000 using a general multivariate vector equilibrium correction modelling framework capable of simultaneously allowing for asymmetric adjustment and regime shifts this approach has a very general underlying theoretical rationale that allows for time varying term premia and other short run deviations from the expectations model of the term structure the resulting nonlinear models provide good in sample fits display regime switches closely related to key state variables driving monetary policy decisions and have satisfactory out of sample forecasting properties

the newsstand problem a capacitated multiple product single period inventory problem abstract practically all of the many earlier papers on the newsboy problem consider a single newsboy product with no capacity constraint this paper presents formulations and solution procedures for handling multiple newsboy type products under two cases a one resource capacity constraint and b multiple resource constraints for case a we present a necessary extension to the classical hadley whitin result for handling general demand distributions for case b we present a solution procedure that can efficiently handle the common situation where a very large number of products are involved

risk hedging in a supply chain option vs price discount abstract in this research two risk hedging strategies the option contract and the advance purchase discount contract are investigated within a manufacturer retailer two echelon supply chain context this study offers three contributions first the optimal decisions under the two contracts from the perspectives of both the manufacturer and the retailer are determined second circumstances under which supply chain coordination can be reached are identified third the scenario of loss averse manufacturer has been explored the results of the analysis provide practical insights to the manufacturer when she plans production quantity and to the retailer when he replenishes inventory

the asymmetric business cycle abstract the business cycle is a fundamental yet elusive concept in macroeconomics in this paper we consider the problem of measuring the business cycle first we argue for the output gap view that the business cycle corresponds to transitory deviations in economic activity away from a permanent or trend level then we investigate the extent to which a general model based approach to estimating trend and cycle for the u s economy leads to measures of the business cycle that reflect models versus the data we find empirical support for a nonlinear time series model that produces a business cycle measure with an asymmetric shape across nber expansion and recession phases specifically this business cycle measure suggests that recessions are periods of relatively large and negative transitory fluctuations in output however several close competitors to the nonlinear model produce business cycle measures of widely differing shapes and magnitudes given this model based uncertainty we construct a mode

electronic tickets smart cards and online prepayments when and how to advance sell advance selling occurs when sellers allow buyers to purchase at a time preceding consumption shugan and xie 2000 electronic tickets smart cards online prepayments and other technological advances make advance selling possible for many if not all service providers these technologies lower the cost of making complex transactions at a greater distance from the seller s site they also give sellers more control over advance selling by decreasing arbitrage as technology enhances the capability to advance sell more academic attention is vital this paper strives to exploit these technologies by developing advance selling strategies until recently advance selling research focused on the airline industry and specific characteristics of that industry these characteristics included the price insensitivity of late arrivals e g business travelers compared with early arrivals e g leisure travelers demand uncertainty across flights on the same day and capacity constraints recent findings by shugan and xie 2000 show that advance selling is a far more general marketing tool than previously thought it does not require these industry specific characteristics it only requires the existence of buyer uncertainty about future valuations moreover sellers without the ability to price discriminate can use advance selling to improve profits to the level of first degree price discrimination this finding is important because buyers are nearly always uncertain about their future valuations for most services e g the utility of next year s vacation or a future college education in this paper we take the next step from shugan and xie 2000 we show that advance selling profits do not come from buyer surplus but from more buyers being able to purchase we determine when and how to advance sell in a variety of situations including situations with limited capacity second period arrivals refunds buyer risk aversion exogenous credibility continuous preference distributions and premium pricing we determine when advance selling improves profits and when it does how to set advance prices we ask and answer seven questions first when should sellers advance sell second how much can advance selling improve profits compared with only spot selling third what factors impact the profitability of advance selling and how fourth should advance prices be higher or lower or the same as spot prices fifth how do capacity constraints impact advance selling strategies sixth should sellers limit the number of advance sales finally what is the possible impact of buyer risk aversion first we provide precise conditions when sellers should advance sell for example without capacity constraints we show that sellers should advance sell when marginal costs are sufficiently low to make it profitable to sell to buyers with low valuations and sufficiently high to convince buyers that the spot price will be higher than the advance price second we find that advance selling can almost double the profits from optimal spot selling to early arrivals we also show that advance selling has no impact on consumer surplus in markets with homogenous consumers and no capacity constraints therefore advance selling can increase social welfare because seller profits increase third we find that two very important factors impacting the profitability of advance selling are seller credibility and marginal costs buyers only advance buy when they expect an advantage from advance buying over spot buying without capacity constraints sellers must credibly convince buyers that the advance price is at a discount to the spot price we show that this condition is met under different circumstances for example large marginal costs can create credibility because buyers believe that these costs will lead to high spot prices fourth we find although optimal advance prices can be at a discount to the spot price that sometimes a premium is optimal premiums are optimal when capacity is large but limited and marginal costs are not too large buyers advance purchase at a premium to spot prices when capacity is limited and spot prices are low note that this is not a risk premium and risk aversion is not required no prior research has suggested this strategy because that research relies on the assumption that early arrivals are more price sensitive than later ones without that assumption premium advance pricing is sometimes optimal fifth we find that binding capacity constraints can impact the profitability of advance selling in opposite ways on one hand capacity constraints create seller credibility buyers believe that spot prices will be high when they know spot capacity is limited and perhaps more limited by advance sales on the other hand when capacity is limited the need to increase sales from discounted advance prices diminishes sixth consistent with desiraju and shugan 1999 we find that limiting advance sales can be profitable but only under restrictive conditions these conditions are 1 selling to all early arrivals would leave insufficient capacity in the spot period to sell to all second period arrivals with high valuations 2 the optimal spot price is high and 3 marginal costs are sufficiently small to make advance selling profitable finally we find that buyer risk aversion can sometimes increase the profitability of advance selling our findings provide precise guidelines for a large number of service providers that will have the technical capability to advance sell for those service providers advance selling provides a creative pricing strategy that can potentially provide substantial improvements in profits

information acquisition for capacity planning via pricing and advance selling when to stop and act this paper investigates a capacity planning strategy that collects commitments to purchase before the capacity decision and uses the acquired advance sales information to decide on the capacity in particular we study a profit maximization model in which a manufacturer collects advance sales information periodically prior to the regular sales season for a capacity decision customer demand is stochastic and price sensitive once the capacity is set the manufacturer produces and satisfies customer demand to the extent possible from the installed capacity during the regular sales period we study scenarios in which the advance sales and regular sales season prices are set exogenously and optimally for both scenarios we establish the optimality of a control band or a threshold policy that determines when to stop acquiring advance sales information and how much capacity to build we show that advance selling can improve the manufacturer s profit significantly we generate insights into how operating conditions such as the capacity building cost and market characteristics such as demand variability affect the value of information acquired through advance selling from this analysis we identify the conditions under which advance selling for capacity planning is most valuable finally we study the joint benefits of acquiring information for capacity planning through advance selling and revenue management of installed capacity through dynamic pricing

an empirical analysis of real exchange rate movements in the euro this study uses a long run structural vector autoregressive svar approach to identify the sources of real exchange rate fluctuations in the euro the empirical results indicate that real shocks play a dominant role in explaining the real exchange rate fluctuations in the euro this implies that the best approach for policymakers toward improving the competitiveness of the eu is to focus on improvements in the real economy such as improvements in efficiency technologies and productivity

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

optimal ordering decisions with uncertain cost and demand forecast updating we determine the optimal ordering policy for a retailer who has two instants to order a seasonal product from a manufacturer prior to a single selling season while the demand is uncertain the retailer can improve the forecast by utilizing the market signals observed between the first and second instants however because of the nature of the manufacturing environment the unit cost at the second instant is uncertain and could be higher or lower than the unit cost at the first instant to determine the profit maximizing ordering strategies at both instants the retailer has to evaluate the trade off between a more accurate forecast and a potentially higher unit cost at the second instant we present a nested newsvendor model for determining the optimal order quantity at each instant and characterize the conditions under which it is optimal for the retailer to delay its order until the second instant

dynamic pricing in the presence of inventory considerations research overview current practices and future directions the benefits of dynamic pricing methods have long been known in industries such as airlines hotels and electric utilities where the capacity is fixed in the short term and perishable in recent years there has been an increasing adoption of dynamic pricing policies in retail and other industries where the sellers have the ability to store inventory three factors contributed to this phenomenon 1 the increased availability of demand data 2 the ease of changing prices due to new technologies and 3 the availability of decision support tools for analyzing demand data and for dynamic pricing this paper constitutes a review of the literature and current practices in dynamic pricing given its applicability in most markets and its increasing adoption in practice our focus is on dynamic intertemporal pricing in the presence of inventory considerations

are health expenditures and gdp characterized by asymmetric behaviour evidence from 11 oecd countries in this article we examine whether per capita health expenditures and per capita gdp for 11 oecd countries can be characterized by asymmetric behaviour we achieve this goal by using the nonparametric triples test suggested by randles et al 1980 we examine two forms of asymmetries namely deepness and steepness our main finding is that for 6 out of 11 countries namely for the usa the uk japan spain finland and iceland either per capita health expenditures or per capita gdp are characterized by asymmetric behaviour this finding to some extent casts doubt on those studies that model the relationship between health and gdp using unit root and cointegration tests that assume symmetric disturbances

the migration response to increasing temperatures climate change especially the warming trend experienced in recent years by several countries could affect agricultural productivity as a consequence the income of rural populations will change and with it the incentives for people to remain in rural areas using data from 115 countries between 1960 and 2000 we analyze the effect of differential warming trends across countries on the probability of either migrating out of the country or from rural to urban areas we find that higher temperatures in middle income economies increased migration rates to urban areas and to other countries in poor countries higher temperatures reduced the probability of migration to cities and to other countries consistently with the presence of severe liquidity constraints in middle income countries migration represents an important margin of adjustment to global warming potentially contributing to structural change and even increasing income per worker such a mechanism however does not seem to work in poor economies

purchasing pricing and quick response in the presence of strategic consumers we consider a retailer that sells a product with uncertain demand over a finite selling season the retailer sets an initial stocking quantity and at some predetermined point in the season optimally marks down remaining inventory we modify this classic setting by introducing three types of consumers myopic consumers who always purchase at the initial full price bargain hunting consumers who purchase only if the discounted price is sufficiently low and strategic consumers who strategically choose when to make their purchase a strategic consumer chooses between a purchase at the initial full price and a later purchase at an uncertain markdown price in equilibrium strategic consumers and the retailer make optimal decisions given their rational expectations regarding future prices availability of inventory and the behavior of other consumers we find that the retailer stocks less takes smaller price discounts and earns lower profit if strategic consumers are present than if there are no strategic consumers we find that a retailer should generally avoid committing to a price path over the season assuming such commitment is feasible committing to a markdown price or to not mark down at all is often too costly inventory may remain unsold even in the presence of strategic consumers the better approach is to be cautious with the initial quantity and then mark down optimally furthermore we discuss the value of quick response the ability to procure additional inventory after obtaining updated demand information albeit at a higher unit cost than the initial order we find that the value of quick response to a retailer is generally much greater in the presence of strategic consumers than without them on average 67 more valuable and as much as 558 more valuable in our sample in other words although it is well established in the literature that quick response provides value by allowing better matching of supply with demand it provides more value often substantially more value by allowing a retailer to control the negative consequences of strategic consumer behavior