risk aversion in contests in a contest participants spend money or effort to increase their chances of winning a prize the authors examine primarily the following question could the timid the more risk averse have a better chance of winning in contests under limited liability the answer is always positive in the absence of limited liability there is no single answer whereas when the prize is shared as a function of effort the outcome is independent of the contestants risk aversion the authors also relate their results to self protection and examine some other implications of risk aversion copyright 1995 by royal economic society

capacity choice and the theory of the mine when extraction from mineral deposits is constrained byfixed capacity an r per cent rule holds this deposit specific rule however is more partial than hotelling s rule in that it is followed byprice takers and does not require price to adjust to produce equilibrium toobtain the resource rent to which the rule applies the shadow value ofcapacity must be subtracted from the usual net price i e price lessshort run marginal cost but the shadow value of capacity cannot becalculated from common depreciation formulas an alternative method ofcalculating the shadow values is derived the shadow value of reserves maybe increasing in the level of initial reserves if there are increasingreturns to installing capacity the value of the resource is not equal tothe discounted resource rent

does the resource curse hold for growth in genuine income as well summary existing studies analyzing the so called resource curse hypothesis regress growth in gross domestic product gdp on some measure of resource intensity this is problematic as gdp counts natural and other capital depreciation as income deducting depreciation from gdp to arrive at genuine income we test whether the curse still holds true we find supporting evidence but the growth disadvantage of resource intensive economies is slightly weaker in terms of genuine income than gdp we suggest that this provides additional but somewhat weak and limited evidence in support of those who argue that the curse is partly due to unsustainable overconsumption

opec market failure or power failure abstract the actions of opec and saudi arabia are discussed in terms of their objectives and their technical and social constraints it is concluded 1 that opec does not act as a cartel and 2 that hotelling s rule is not an important feature of pricing or production opec s more specifically saudi arabia s ideal policy is to keep price moderate to try to assure a market for their high reserves over the long run such an action would require heavy investments in capacity including in excess capacity for times of interruption of supply from other countries as in the 1990s and for times of high demand as in the 2000s the action may be inconsistent with other objectives and in any case may be too difficult to achieve

scheduling the production of several items with random demands in a single facility consider the problem of scheduling the production of several items in a single facility that can produce only one item at a time this problem occurs since it is often economic to produce several items in a single facility the objective is to reduce the long run average holding backorder and setup costs we assume that demands are random with constant expected rates we allow backorders and charge holding and backlogging costs at linear time weighted rates items are produced at continuous constant rates setup times and setup costs are item dependent constants these parameters however are independent of the order of setups a real time scheduling tool is developed in three steps first with demands replaced by their expectations we compute an optimal or near optimal target cyclic schedule next we study the problem of scheduling the facility after a single disruption perturbs the inventories the goal is to recover the target cyclic schedule at minimal excess over the average cost of the cyclic schedule we formulate this as a control problem and obtain a linear recovery policy that is optimal for a large configuration of disruptions finally we select safety stocks to minimize the long run average cost of following the target schedule with the recovery policy we show that optimal safety stocks are unique and have the property that in the long run the proportion of time that an item is in stock is the ratio of backorder to holding plus backorder cost we present an example that integrates the cyclic schedule the control policy and the safety stocks

neutral taxation under uncertainty abstract the analogs under uncertainty of two well known certainty results are derived first if there are timing differences between tax payments and accruals neutrality is preserved if the resulting tax credits or liabilities are carried forward at the risk free interest rate provided that tax credits and liabilities are sure to be redeemed eventually second the invariance of asset valuations with respect to the rate of income tax at a given pre tax interest rate proved by johansson and samuelson under certainty can be extended to cover the case of uncertainty given analogous ceteris paribus conditions

determination of safety stocks for cyclic schedules with stochastic demands abstract this paper considers the problem of scheduling the production of multiple items each with random demand on a single facility we show how the variance in demand during lead time can be estimated and present a model for determination of safety stocks and order up to levels for a fixed cyclic sequence both with and without idle time for systems with idle time we present a control model to make the decision to produce next item in sequence or idle the facility the performance of the model is tested in a simulation study

an eoq model for perishable products with fixed shelf life under stochastic demand conditions abstract the paper presents a mathematical stochastic model for perishable open dating foods including shortage and outdating costs the demand fluctuations have been taken into account modeling them through a normal distribution and their impact on the storage time has been studied considering the stochastic nature of such a parameter in turn the quantification of perished products has been also addressed determining the probability for a product of remaining in stock beyond the end of its shelf life on the basis of such premises the optimal set of parameters that minimize the total unit cost has been determined a numerical application and a sensitivity analysis show the practical applicability of the proposed model in the context of warehouse management underlining managerial insights

the green paradox and budgetary institutions abstract we examine oil production strategies in response to the rise of alternative energy in context of saudi arabia and the united states in a unified simultaneous equation model sem over the period 1976 2015 we investigate the extent to which budget balance behaviour explains the nature of oil production strategies we find that green regulations have a positive impact on u s oil production while an inverse relationship holds for saudi arabia we argue that the nature of budgetary institutions prevents saudi arabia from following a profit maximising behaviour saudi arabia is incentivised to ensure political cohesion through adopting a procyclical fiscal policy rather regulators seem incentivised to channel surplus towards individuals to gain popularity in the united states a thriving shale oil industry is a plausible rationale for u s production strategies also known as a weak green paradox this is problematic for climate change initiatives to reduce global emissions climate experts may wish to pay more attention to the supply side of oil markets when designing decarbonisation plans the results challenge conventional wisdom of the green paradox neglecting the role of incentive structure between different types of oil producers

modelling imperfect advance demand information and analysis of optimal inventory policies we consider an inventory control problem where it is possible to collect some imperfect information on future demand we refer to such information as imperfect advance demand information adi which may occur in different forms of applications a simple example is a company that uses sales representatives to market its products in which case the collection of sales representatives information as to the number of customers interested in a product can generate an indication about the future sales of that product hence it constitutes imperfect adi other applications include internet retailing vendor managed inventory vmi applications and collaborative planning forecasting and replenishment cpfr environments we develop a model that incorporates imperfect adi with ordering decisions under our system settings we show that the optimal policy is of order up to type where the order level is a function of imperfect adi we also provide some characterizations of the optimal solution we develop an expression for the expected cost benefits of imperfect adi for the myopic problem our analytical and empirical findings reveal the conditions under which imperfect adi is more valuable

taming the bullwhip effect whilst watching customer service in a single supply chain echelon we study a generalised order up to policy that has highly desirable properties in terms of order and inventory variance and customer service levels it generates we quantify exactly the variance amplification in replenishment orders i e the bullwhip effect and the variance of inventory levels over time for i i d and the weakly stationary auto regressive ar moving average ma and auto regressive moving average arma demand processes we demonstrate that high customer service as measured by fill rate and smooth replenishments need not increase inventory cost substantially we observe that in some instances of the arma demand pattern this comes at the expense of a relatively small increase in safety stock whilst in other instances inventory levels can actually be reduced

the political economy of resource driven growth abstract in recent decades resource poor countries have out performed resource abundant ones a stylised facts model of competitive industrialisation describes the long run development of a resource poor country with a political state that is developmental only minor change is required to adapt the model to trace the development trajectory of a resource abundant country with a similar political state however most resource abundant countries engender a political state that is factional or predatory and distorts the economy in the pursuit of rents a staple trap model describes the development trajectory under these conditions the model predicts a growth collapse from which recovery is protracted especially for small economies that lack a niche trade link with a large economy

valuing petroleum reserves using current net price i introduction the hotelling valuation principle hvp states that when valuing any depleting mineral reserve one can simply multiply the current net price price less unit extraction cost associated with those reserves by the quantity of reserves 1 v sub s lambda sub s r sub s where lambda sub s p sub s c sub s is the current time s net price and r sub s is current recoverable reserves in place miller and upton 1985a the derivation combines discounted cash flow dcf analysis with hotelling s 1931 result that in equilibrium the net price of a non renewable resource must rise at the rate of interest with net cash flows being inflated and discounted at the same rate the result is intuitive and its simplicity has drawn the attention of mineral appraisers and national income accounting agencies 1 the u s department of commerce for instance uses equation 1 as one method of valuing the stock and depletion of the nation s mineral assets carson 1994 miller and upton 1985a 24 empirically test the principle against oil and gas reserve values imputed from firm balance sheets and conclude that it provides not only reasonably good descriptions of the structure of actual market values of a sample of u s petroleum producing companies but substantially better descriptions than the publicly available alternative appraisals based on much the same underlying raw data they claim that the abstractions of the hvp constant marginal cost perfect information and perfect competition do not appear to invalidate the empirical performance and so miller and upton propose that equation 1 remains theoretically intact even when these abstractions are relaxed further investigation however has found the hvp to severely overvalue oil and gas reserves for example watkins 1992 finds that the formula overvalues oil and gas reserve transactions by an average of 85 2 indeed in miller and upton s original work the imputed reserve values are less than the hvp values in 81 of 94 valuations in the first data set and in 95 of 98 in a second data set in many cases by 50 or more 3 several empirical studies have found that the coefficient on lambda sub s r sub s in equation 1 is in the order of one half this tendency of the hvp to overstate the value of petroleum reserves is recognized by users of the principle such as bartelmus et al 1994 who nevertheless continue to rely on it for reserve valuation several economists have attempted to explain the overvaluation magliolo 1986 investigates data sources and tax effects cairns and davis 1998 and davis and moore 1998 show that for the case of hard rock mining capacity constraints on production produce a coefficient on lambda sub s r sub s that is less than one others have instead rejected not only the hvp as a valuation tool but also the entire hotelling theory underlying the principle for example adelman 1993 and watkins 1992 argue that i for practical purposes there is no binding resource stock constraint for oil and gas as explicitly assumed by hotelling 1931 and ii oil and gas net price data do not reveal hotelling s r rule mcdonald 1994 adds that regulation of well spacing and extraction rates is another important facet of oil production that is not modeled by hotelling and that this could be a cause of the empirical failure of the principle still others propose that oil reserves cannot be valued accurately using a discounted cash flow framework rather the analyst must also incorporate an option value which arises whenever producers can adjust production through time in response to realizations of stochastic events such as price fluctuations brennan and schwartz 1985 paddock siegel and smith 1988 and smit 1997 this position is valid but it does not explain the empirical failures of equation 1

on the interaction between forecasting and stock control the case of non stationary demand the effect of using estimated forecast demand parameters on the performance of an inventory control system is an intriguing and important subject recent research has been undertaken on this phenomenon assuming stationary demand data in this paper we extend the research to non stationary demands by means of simulation the case of a periodic order up to level inventory system is considered and the experimental structure allows us to evaluate in a progressive manner the accumulated effect of using the optimal forecasting method optimal forecast parameters and correct variance expression procedures the results allow insights to be gained into operational issues and demonstrate the scope for improving stock control systems

on the design of a neutral business tax under uncertainty this paper extends the results of boadway and bruce journal of public economics 1984 24 231 239 and fane journal of public economics 1987 33 95 105 to describe a tax on business profits which is neutral with respect to investment and wind up decisions and default outcomes under uncertainty and bankruptcy risk the tax base allows deductions for depreciation and the cost of finance but requires knowledge of neither true economic depreciation nor the firm s required rate of return we show that the tax must treat taxable profits and losses symmetrically and that the tax rate must be a known constant even in the special case when the tax base coincides with the economic rent earned in each period

cyclical schedules vs dynamic sequencing replenishment dynamics and inventory efficiency abstract this paper addresses the efficiency of fixed sequence cyclical scheduling systems relative to that of dynamically sequenced order point methods of production control the criterion for comparison is the aggregate inventory required to achieve a target fill rate taking into account the alternative replenishment dynamics arising under the respective systems a simulation analysis demonstrates that cyclical scheduling may have smaller aggregate inventory requirement when the production process is highly utilized and when this utilization is due to demand for a small number of items having large setup times

forecasting and inventory management of short life cycle products in this paper we provide an integrated framework for forecasting and inventory management of short life cycle products the literature on forecasting and inventory management does not adequately address issues relating to short life cycle products we first propose a growth model that can be used to obtain accurate monthly forecasts for the entire life cycle of the product the model avoids limiting data requirements of traditional methods instead it extracts relevant information from past product histories and utilizes the information on total life cycle sales and the peak sales timing using disguised demand data from a personal computer pc manufacturer we validate the model next we model the inventory management problem for the short life cycle environment the uncertainty in demand is modeled through the uncertainty in the realized values of the parameters of the forecasting model the high cost of terminal inventory shortages and rapidly changing procurement costs are all included in the model extensions to the basic model are also developed using optimal control theory we derive a solution that provides valuable information on procurement cutoff time and terminal service levels a detailed example explains the characteristics of the policy and its relevance in decision making many of the issues covered in the models were brought to our attention while implementing a forecasting model at a pc manufacturer the benchmark monthly forecasts and the associated inventory levels provide information that can be very helpful in planning and controlling marketing sales and production

economic lot scheduling heuristic for random demands abstract an extension to the economic lot scheduling problem is given for a single machine multi product line under random demands the goal is to find the length of production cycles that minimizes the sum of setup and inventory holding costs per unit of time and satisfies the demand for each product at the required service level first the single product finite replenishment inventory model is extended to the case of random demand then a heuristic procedure uses this extension to determine the production cycles for the multi product case computational results and comparisons with other models are reviewed

saving and growth evidence from micro data abstract this paper examines whether the observed cross country correlation between aggregate saving rates and economic growth can be explained by models in which higher growth increases saving rates rather than the other way around there are two explanations why higher growth might increase saving first life cycle theory implies that higher growth will increase the life time wealth of younger savers relative to older dissavers thereby increasing the aggregate saving rate second models of consumption with habit formation imply that consumption responds slowly to unexpected income growth so unanticipated growth can produce a higher saving rate at least in the short run i assess these explanations using time series of cross sections of household surveys from four countries the us britain taiwan and thailand i find evidence that higher growth will produce only small increases in aggregate saving rates

the green paradox of the economics of exhaustible resources abstract the green paradox states that an increasing tax on emissions of carbon dioxide consonant with the expected increase in their marginal damages may induce oil producers to shift their production toward the present and thereby to exacerbate the problem of climatic change the model is based on hotelling models of resource use that do not take the natural and technical features of oil production into account natural features include the decline of production through time according to a decline curve technical features include the requirement to sink investment in productive capacity a model of a profit maximizing firm indicates that if these features are taken into account the prediction of the green paradox is unlikely

statistical learning of service dependent demand in a multiperiod newsvendor setting we study an inventory system wherein a customer may leave the seller s market after experiencing an inventory stockout traditionally researchers and practitioners assume a single penalty cost to model this customer behavior of stockout aversion recently a stream of researchers explicitly model this customer behavior and support the traditional penalty cost approach we enrich this literature by studying the statistical learning of service dependent demand we build and solve four models a baseline model where the seller can observe the demand distribution a second model where the seller cannot observe the demand distribution but statistically learns the demand distribution a third model where the seller can learn or pay to obtain the exact information of the demand distribution and a fourth model where demand in excess of available inventory is lost and unobserved interestingly we find that all four models support the traditional penalty cost approach this result confirms the use of a state independent stockout penalty cost in the presence of demand learning more strikingly the first three models imply the same stockout penalty cost which is larger than the stockout penalty cost implied by the last model

decomposition of new venture growth into firm age survey period and vintage effects firm data are accumulated on a yearly basis in view of the linear relationship of firm age foundation year survey year the fluctuations of firm data classified by age and period cannot be decomposed into age period and cohort foundation year effects three decomposition methods are briefly reviewed and applied to japanese data on new ventures founded since 1995 regarding sales and employment growth the age effect is the largest with a downward trend and the cohort effect is negligible regarding labour productivity the age effect indicates upward movements and the cohort effect is negligible the reason of the negligible cohort effect is discussed

mission improbable does petroleum related aid address the resource curse petroleum related aid programmes and projects are a key part of donor activities in oil rich developing countries this paper critically assesses petroleum related aid activities using the norwegian oil for development programme as a main case recent research suggests that institutions or governance are essential in averting a resource curse while governance issues are beginning to receive more attention in these types of programmes they still form a minor part of programme activities the narrow sector focus that characterizes petroleum related aid makes it unlikely that it will produce the higher order institutional changes needed to lift the resource curse petroleum related aid activities address the issue of corruption only to a limited extent given the commercial and political interests of donor countries questions about the integrity and credibility of these types of programmes can be raised

inventory management with random supply and imperfect information a hidden markov model in most of the papers on inventory models operating in a random environment the state of the environment in each period is assumed to be fully observed with perfect information however this assumption is not realistic in most real life situations and we provide a remedy in this paper by assuming that the environment is only partially observed with imperfect information we accomplish this by analyzing two formulations of single item models with periodic review and random supply in a random environment in the first one supply is random due to random capacity of production and random availability of transportation we show that state dependent base stock policy is optimal if the capacity and all costs are observed while demand and availability are unobserved in the second model we consider a model with random availability only with fixed ordering cost we show that state dependent s s policy is optimal if the availability process is observable

quasi fixed cyclic production schemes for multiple products with stochastic demand abstract in this paper we present an approach to generate cyclic production schemes for multiple products with stochastic demand to be produced on a single production unit this scheme specifies a fixed and periodic production sequence called a cycle where each product may occur more than once in the sequence in order to stabilize the cycle length alternative control strategies are introduced these strategies keep the cycle length close to a target length by means of adding idle time to the cycle cutting production short or overproduction on basis of the selected control strategy as well as a base stock policy target inventory levels are determined for each production run in the cycle demand can be backlogged but a certain service level is required setup times are sequence dependent and the storage is capacitated employing the developed strategies we investigate the tradeoff between stability of cycle length and total cost induced by the production schedule in a computational study based on both real world data and random test instances

bayes solution to dynamic inventory models under unknown demand distribution this paper considers the periodic review inventory problem for which one or more parameters of the demand distribution are unknown with a known prior distribution chosen from the natural conjugate

non stationary demand forecasting by cross sectional aggregation in this paper the relative effectiveness of top down td versus bottom up bu approaches is compared for cross sectionally forecasting aggregate and sub aggregate demand we assume that the sub aggregate demand follows a non stationary integrated moving average ima process of order one and a single exponential smoothing ses procedure is used to extrapolate future requirements such demand processes are often encountered in practice and ses is one of the standard estimators used in industry in addition to being the optimal estimator for an ima process theoretical variances of forecast error are derived for the bu and td approach in order to contrast the relevant forecasting performances the theoretical analysis is supported by an extensive numerical investigation at both the aggregate and sub aggregate level in addition to empirically validating our findings on a real dataset from a european superstore the results demonstrate the increased benefit resulting from cross sectional forecasting in a non stationary environment than in a stationary one valuable insights are offered to demand planners and the paper closes with an agenda for further research in this area

resource intensity institutions and development summary we examine the relationship between resource abundance and several indicators of human welfare consistent with the existing literature on the relationship between resource abundance and economic growth we find that given an initial income level resource intensive countries tend to suffer lower levels of human development while we find only weak support for a direct link between resources and welfare there is an indirect link that operates through institutional quality there are also significant differences in the effects that resources have on different measures of institutional quality these results imply that the resource curse is a more encompassing phenomenon than previously considered and that key differences exist between the effects of different resource types on various aspects of governance and human welfare 2005 elsevier ltd all rights reserved

petroleum taxation the effect on recovery rates abstract petroleum tax design analysis usually abstracts from the fact that taxation affects not only project selection but also concept design and drainage strategy and thereby the extraction and recovery rate the implicit assumption is that oil companies are unresponsive to tax changes where concept selection and production decisions are concerned in his novel approach smith 2014 develops a broader model which accounts for the additional effects this provides a consistent framework which permits analysis of specific settings berg et al 2018 apply the model to establish the effect of a reduction in uplift on the norwegian continental shelf ncs and find for this case that the traditional assumption of an unresponsive company still holds analysing field data from the ncs we find that the actual production profiles do not resemble the mathematically tractable theoretical model of a constant decline in production used in smith 2014 and berg et al 2018 and we explain why this is the case for offshore fields we propose a novel theoretical resource model which fits the data from the 92 largest fields on the ncs it is a general resource model that allows for injection from start of production and where the model of a constant decline in production is a special case our model is also a mathematically tractable model of constant decline but where the decline is at the level of the individual well rather than the field the recovery rate is thus responsive to the number of wells and tax design affects the recovery rate our findings suggest that companies are responsive and that tax design should take account of distortions in the selection of development concepts

inventory control in a fluctuating demand environment we present an inventory model where the demand rate varies with an underlying state of the world variable this variable can represent economic fluctuations or stages in the product life cycle for example we derive some basic characteristics of optimal policies and develop algorithms for computing them in addition we show that certain monotonicity patterns in the problem data are reflected in the optimal policies

corruption and competition in procurement auctions we investigate the effect of corruption on competition in procurement our assumption is that the bureaucrat i e the agent that administers the market if corrupt may provide an opportunity for bid readjusments in exchange for a bribe as firms expect to be paying a bribe a mechanical effect of corruption is to increase the contract price by an amount corresponding to the anticipated bribe we show however that a key effect of corruption is to facilitate collusion in price between firms and thereby to generate a price increase that goes far beyond the bribe received by the bureaucrat we discuss the effect of other forms of bureaucratic discretion in the procurement process and analyze conditions under which unilateral anticorruption controls restore price competition

simulation based sequencing and lot size optimisation for a production and inventory system with multiple items abstract we investigate the following decision problem a manufacturing unit has to meet a random demand for n items at the same time only one item can be manufactured manufacturing times are random whereas set up times are known positive constants but different for different items finished production is stored in a warehouse with finite capacity the availability of raw material is always guaranteed demand that cannot be satisfied by items in the warehouse will be backordered in a queue with given capacity demand that meets a full backorder queue is lost we assume cost for manufacturing items for production switches for holding items in the warehouse for waiting and lost demand for sold items a given reward is earned the problem now is to define such a manufacturing policy i e a sequencing rule and a lot size rule which maximises the expected profit per time unit since that problem is too complex for an analytical solution we restrict our search for an optimal policy to simple structured policies which can be described by a few parameters to find optimal parameter values we use simulation optimisation where a simulator for the system is combined with a genetic algorithm as an optimiser the paper is finished with some numerical examples to show the applicability of the proposed approach

good timing the economics of optimal stopping abstract this paper presents an economic interpretation of the optimal stopping of perpetual project opportunities under both certainty and uncertainty prior to stopping the expected rate of return from delay exceeds the rate of interest the expected rate of return from delay is the sum of the expected rate of change in project value and the expected rate of change in the option premium associated with waiting at stopping the expected rate of return from delay has fallen to the rate of interest viewing stopping in this way unifies the theoretical and practical insights of the theory of stopping under certainty and uncertainty

the strategic use of capacity slack in the economic lot scheduling problem with random demand growing interest in designing systems with capacity slack as one form of flexibility raises many questions about its use and its usefulness in the framework of the economic lot scheduling problem with stochastic demand we develop on optimization based model that considers capacity slack safety stock and overtime explicitly and has the objective of minimizing the expected cost per unit time of inventory overtime and where applicable setup costs the solution is a continuous time production plan that consists of a time dependent inventory trajectory for each of the parts including the placement of planned idle time in the schedule we consider schedule stability to be desirable because of potential effects on upstream and downstream operations in multistage production settings thus the plan also has certain characteristics that contribute to achieving stability our results on the relative merits of capacity slack and safety stock indicate that capacity slack in the form of planned idle time is

periodic versus can order policies for coordinated multi item inventory systems the coordinated multi item inventory problem refers to the problem of managing inventories where there is a joint fixed cost for replenishing plus an item by item fixed cost for each item included in the replenishment order given that the optimal solution is likely to be too complex attention has focused on fixed heuristics and in particular can order or s c s policies this paper makes two contributions first a new lower bound on the cost of the optimal policy is proposed in order that the performance of heuristics may be measured second motivated by the lower bound a simple periodic policy is proposed and shown to be an improvement over can order policies for many data sets

economic development legality and the transplant effect abstract we analyze the determinants of effective legal institutions legality using data from 49 countries we show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family countries that have developed legal orders internally adapted the transplanted law and or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar predispositions the transplanting process has a strong indirect effect on economic development via its impact on legality while the impact of particular legal families is weaker and not robust to alternative legality measures

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

managing inventory with the prospect of obsolescence how should inventory management respond when there is a possibility of imminent obsolescence or more generally deteriorating demand we use an inventory control model to address this question the model incorporates a markovian submodel to describe the uncertain events leading to obsolescence these events and their uncertainties come in a variety of patterns we devote considerable attention to specifying the submodel and we compare a few alternatives numerically also we compare optimal policies to simpler alternatives and we investigate the response of the model to parameter changes generally we find that obsolescence does or should have a substantial impact in the way inventories are managed the nature of these effects moreover is fairly intricate it appears that obsolescence cannot be captured in a simpler model through parameter adjustments these conclusions presume that we cannot dispose of excess stock either directly or through price promotions we show also that the disposal option can make the problems of obsolescence more manageable

modeling the response to exogenous shocks the capital uplift rate in petroleum taxation abstract we show how a recent drop in the norwegian capital uplift rate by two percentage points changes optimal field design and reduces field value for shareholders although optimal design changes considerably and value drops by 12 the ability to reoptimize design after the shock is worth only 1 5 of field value this evidence suggests that large behavioral effects of a shock do not necessarily imply large value effects making it less important to always account for the taxpayers response the valuation error in such cases may be moderate if one instead uses the simplifying and widespread assumption of unresponsive taxpayers

the multi sourcing location inventory problem with stochastic demand abstract this paper deals with a multi period location inventory optimization problem in a multi echelon supply chain network characterized by an uncertain demand and a multi sourcing feature the aim of the paper is to propose a generic modeling approach to integrate key features of the inventory planning decisions made under a reorder point order up to level s s policy with the location allocation design decisions to cope with demand uncertainty given the hierarchical structure of the problem a two stage stochastic mathematical model that maximizes the total expected supply chain network profit is proposed this optimization model is intractable due to its non linearity therefore a linear approximation is proposed and a sample average approximation approach is used to produce near optimal solutions numerical experiments are conducted to validate the proposed modeling and solution approaches the results show the efficiency of the linear approximation of the s s policy at the strategic level to produce robust design solutions under uncertainty they underline the sensitivity of the design solution to the demand type and the impact of the inventory holding costs and backorder costs especially under non stationary processes

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

optimizing service level and relevant cost for a stochastic multi item cyclic production system a multi item make to order production system in a stochastic environment is analyzed assuming a common cycle production approach the impact of safety stock cycle time demand processing time and setup time on service level and total relevant cost holding setup and backorder cost is determined to illustrate this relationship a trajectory for the service level with respect to the relevant cost holding and setup is presented furthermore algorithms to calculate the cycle time which leads to maximum service level at constant safety stock and to calculate the pair cycle time and safety stock which minimize total relevant cost are introduced

coordinated replenishments in a multi item inventory system with compound poisson demands in many practical applications or multi item inventory systems significant economies of scale can be exploited when coordinating replenishment orders for groups of items this paper considers a continuous review multi item inventory system with compound poisson demand processes excess demands are backlogged and each replenishment requires a lead time there is a major setup cost associated with any replenishment of the family of items and a minor item dependent setup cost when including a particular item in this replenishment moreover there are holding and penalty costs we present an algorithm which searches for a simple coordinated control rule minimizing the long run average cost per unit time subject to a service level constraint per item on the fraction of demand satisfied directly from on hand inventory this algorithm is based on a heuristic decomposition procedure and a specialized policy iteration method to solve the single item subproblems generated by the decomposition procedure the model applies to multi location inventory systems with similar cost structures for coordinated deliveries

corruption and reduced oil production an additional resource curse factor prominent contributions to the resource curse literature suggest weak governance and corruption are important factors behind the wide welfare variations observed among oil producing countries how weak governance and corruption influence revenue management and expenditure decisions as well as the possible welfare benefits derived from oil are broadly discussed how they impact upon volumes of oil produced has however attracted little attention this paper combines a review of the resource curse and oil production literatures with findings from qualitative interviews with oil sector experts to appreciate the feasibility of connections between corruption and oil production below its potential we make particular reference to environments where regulatory institutions or political accountability are weak and focus primarily on producer government and oil firm relations drawing on insights from geology political science and economics we suggest suboptimal production solutions can impact volumes of oil actually produced and create constraints on long term revenues for oil producing countries we argue greater disclosure of information on oil production efficiency on a field by field and country by country basis will assist further investigation of the relationships between corruption and volumes of oil produced

corruption and competition in procurement abstract we consider a procurement problem in which the procurement agent is supposed to allocate the realization of a project according to a competitive mechanism that values bids in terms of the proposed price and quality potential bidders have private information about their production costs since the procurement agent is also in charge of verifying delivered quality in exchange for a bribe he can allow an arbitrary firm to be awarded the realization of the project and to produce a quality level lower than that announced we compute equilibrium corruption and we study the impact on corruption of the competitiveness of the environment and in particular of i an increase in the number of potential suppliers of the good or service to be procured and ii an increase of competition in the market for procurement agents we identify the effects that influence equilibrium corruption and show that contrary to conventional wisdom corruption may well be increasing in competition

a parsimonious model of tax avoidance and distortions in petroleum exploration and development abstract we present a simple model of petroleum exploration and development that can be applied to study the performance of alternative tax systems and identify potential distortions although the model is highly simplified it incorporates many factors and some of the key tradeoffs that would influence an investor s investment behavior the model recognizes the role of enhanced oil recovery and treats the impact of taxation on exploration and development in an integrated manner consistent with an investor s joint optimization of investments at both stages of the process the model is simple and user friendly which facilitates application to a broad range of problems

the multiple family elsp with safety stocks the multiple family economic lot scheduling problem with safety stocks mfelsp ss with normally distributed time stationary demand is considered in a manufacturing setting where the relevant costs include family setup costs item setup costs and inventory holding costs for both cycle and safety stocks a family is a subset of the items that share a common family setup with its associated setup cost and setup time each item within the family may have its own setup time and setup cost the families form a partition of the set of items manufactured on a single facility the safety stock level for any item is a function of the time interval between production runs for the item the service level specified and the variance of its demand we consider safety stocks explicitly in the formulation as their holding costs vary nontrivially with the models decision variables the mfelsp ss differs from multilevel inventory models with family setups in that the former assumes noninstantaneous inventory replenishment and considers the cost of holding safety stocks the latter assumes instantaneous replenishment and does not directly assess the impact of safety stock levels on the total cost an efficient solution procedure is developed for this model properties of the nonconvex feasible space are identified and used in the solution approach the solution to the mathematical model comprises the basic period length the family multipliers and the item multipliers that give the lowest total cost of setups and carrying inventory the family multipliers and item multipliers are restricted to integer powers of two

dynamic scoring an introduction to the issues working together cbo and jct provide two types of revenue and expenditure projections for congress i forecasts of expenditures and revenues based on assumptions about what current policy is and ii forecasts of the changes in expenditures and revenues that would result from proposed legislation the first type of forecast is known as a baseline the second type is called scoring the two types of forecasts are interdependent projected effects of legislation depend on the starting point so the baseline affects scoring updates of the baseline reflect the estimated impact of legislation so scoring affects the baseline on the revenue side where dynamic scoring has received the greatest attention the baseline forecasts are provided to congress by cbo while scoring is done by the jct in a sense the debate over dynamic scoring may be traced to an inconsistency in the way that legislative changes are handled by the two agencies macroeconomic feedback effects are ultimately incorporated in cbo s baseline but are not attributed by jct to any source when the proposals are scored this inconsistency is most easily understood in terms of relative informational requirements one can update a baseline to account for macroeconomic changes without attributing these changes to particular legislation indeed the models used to construct baselines are not specified at the level of detail that would be necessary to do so under standard scoring procedures jct scores proposed legislation taking the macroeconomic forecast underlying the cbo baseline including nominal gdp and other aggregates as given it is misleading to refer to these revenue estimates as static because they do take certain behavioral effects into account for example when jct scores a change in the capitalgains tax rate it includes the revenue offset associated with changes in capital gains realizations but missing is any further impact on revenues or expenditures that might result from induced changes in output interest rates or other elements of the macroeconomic forecast thus current scoring estimates incorporate micro dynamic effects but not macro ones

petroleum taxation under uncertainty contingent claims analysis with an application to norway abstract contingent claims analysis provides a useful tool for analysing the value of tax claims and of companies after tax values under uncertainty the method is presented and applied to the analysis of how norwegian petroleum taxes affect company behaviour few results can be derived analytically a numerical approach is suggested with a stylized description of production possibilities the norwegian taxes are found to have strong distortionary effects the relation to other methods and problems connected with the application are discussed

stopped myopic policies in some inventory models with generalized demand processes this paper considers single item inventory systems with immediate delivery and no economies of scale bounds are provided on the value loss relative to optimal cost for restricting attention to the class of inventory stocking policies that behave myopically up to a specified stopping time the stopping time may be random and may depend on demand histories as well as information exogenous to the firm the bounds are robust to the nature of the demand process faced after the stopping time so are applicable when the statistics of demand after the stopping time are unknown stopping times that are large with high probability imply that near term decisions are completely specified with high probability the general bounding results allow one to consider demand processes that may otherwise be analytically intractable it is shown that the class of demand models for which the assumption of additive i i d shocks is appropriate is the same class admitting effective myopic stocking policies the bounds also make rigorous the intuitive notion that myopic policies are least effective in systems with precipitous drops in demand coupled with an inability to recover cash invested in inventory the option of selling inventory at discount is a reality in many real systems and enhances the attractiveness of the myopic stocking policy in numerical examples the myopic policy is shown to be an effective competitor in a range of systems for which optimal policies are not known the results suggest that for systems with immediate delivery no economies of scale and no currently known optimal policy the myopic stocking rule is a reasonable default policy to adopt

petroleum taxes and optimal resource recovery abstract the objective of this paper is to quantify the incentive effects of petroleum taxes this enables us to estimate individual petroleum reservoirs supply functions before and after tax of central importance are the marginal reserves within the petroleum reservoir itself the recovery factor of oil and gas reservoirs is influenced by economic considerations both the rate of return requirement and petroleum taxes play crucial roles the conclusion is that the distorting effects observed in many petroleum taxation systems have serious resource recovery consequences and reduce the recovery factor for individual oil and gas reservoirs

neutrality and efficiency of petroleum revenue tax a theoretical assessment we use an irreversible investment model of oil development to show how a fiscal regime can be both neutral with respect to development decisions and efficient in recouping economic rents we find that there is a unique rate for calculating the tax deductibility of capital costs which ensures economic neutrality while tax efficiency involves high rates of tax on profits after these deductions using parameters of the uk petroleum revenue tax prt numerical calculations in our simplified model suggest that prt was both neutral and relatively efficient in conclusion the tax efficiency of prt is compared with that of a neutral resource rent tax

optimal exploration for and exploitation of heterogeneous mineral deposits abstract we model exploration for and production from a multiple deposit nonrenewable resource exploration is viewed as a bayesian process involving learning about undiscovered reserves and is undertaken both to improve the quality of and to replenish known reserves known reserves are not physically defined but depend on the realizations of discrete episodes of exploration elsewhere and on decisions at each instant about the margin between ore to be mined and low grade material to be rejected the appropriate measure of resource scarcity the sustainable level of the contribution of the resource and the treatment of depletion in the national accounts are considered

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

a cohort analysis of saving behavior by u s households the aim of this paper is to shed some light in the decline in personal saving rates in the united states in the 1980s for a such a purpose the paper analyses the only u s data set containing information on consumption and income at the household level the consumer expenditure surveys cex from 1980 to 1991 because the cex is not a panel most of the analysis is conducted using average cohort techniques the paper identifies a typical age profile for saving rates such a profile is hump shaped and peaks around age 57 the paper also argues that such a profile was shifted down for the cohorts born between 1920 and 1939 relative to the younger and older cohorts considered these cohorts are the parents of the baby boom generation the paper also argues that these cohort effects can account for a non neglible proportion of the decline in aggregate saving because these cohorts were during the 1980s in the ages when saving rates are typically highest the result is robust to the consideration of several controls and holds for several definitions of consumption the only exception is when durable expenditure is considered as saving rather than consumption

reversal of fortunes the rise and fall of lifetime earnings of iranian men abstractthe islamic revolution of 1979 the 8 year war with iraq 1980 88 and the collapse of oil prices in 1986 dealt huge blows to iran s economy in this article we use a pseudopanel constructed from annual multiple surveys during 1984 2004 to analyze changes in cohort earnings and consumption through these tumultuous times using well known techniques we decompose the changes in median cohort earnings of men into cohort age and year effects our results show that cohorts born before 1950 who were well into their careers at the time of the revolution enjoyed a steady increase in lifetime earnings however those born after the mid 1960s who started their careers during the revolution and the war with iraq experienced losses relative to previous cohorts in contrast to earnings per capita expenditures do not indicate a declining cohort trend for younger cohorts when we restrict the year effects to cyclical variation only the cohort effects show a rising trend we interpret the difference in

age period cohort decomposition of aggregate data an application to us and japanese household saving rates this paper compares two methods of analyzing aggregate data that is classified by period and age because there is a linear relationship among age period and cohort it is not possible to distinguish the separate effects without employing an identifying assumption the first method which is applied in the economics literature assumes that period effects are orthogonal to a linear time trend the second method which is applied in the statistics literature assumes that the effect parameters change gradually simulation results suggest that the performances of both methods are comparable the results of applying the second method to household saving rates suggest that period effects had a negligible influence in the united states but considerable influence in japan copyright 2006 john wiley sons ltd

the stochastic economic lot scheduling problem cyclical base stock policies with idle times in this paper we discuss stochastic economic lot scheduling problems elsp i e settings where several items need to be produced in a common facility with limited capacity under significant uncertainty regarding demands production times setup times or combinations thereof we propose a class of production inventory strategies for stochastic elsps and describe how a strategy which minimizes holding backlogging and setup costs within this class can be effectively determined and evaluated the proposed class of strategies is simple but rich and effective when the facility is assigned to a given item production continues until either a specific target inventory level is reached or a specific production batch has been completed the different items are produced in a given sequence or rotation cycle possibly with idle times inserted between the completion of an item s production batch and the setup for the next item an optimal strategy within the class can be determined and all relevant performance measures can be evaluated in just a few cpu seconds using a 486 based pc we also derive a number of easily computable lower bounds for the optimal cost value and establish a comparison with deterministic elsps

lot sizes in a capacity constrained facility a simulation study of stationary stochastic demand abstract this paper considers the scheduling of several different items on a single machine in literature known as the economic lot scheduling problem elsp one of the characteristics of this problem is that the demand rate is deterministic and constant however in a practical situation demand usually varies in this paper we examine if a deterministic model can be used if demand is stationary stochastic a dynamic programming approach from bomberger manage sci 12 11 1966 778 and a heuristic method from segerstedt int j production econom 59 1 3 1999 469 are used to calculate lot sizes for four items the production of these items is simulated with different variations in demand rates our conclusion is that a deterministic model of this kind can be used in a practical situation where the demand rate is stationary stochastic but the models must be complemented by a decision rule which item to produce and when to produce it in our tests the heuristic method and the dynamic programming approach perform rather similarly with respect to costs and inventory levels but the dynamic programming approach results in more backorders when there is small variation in demand rates this study indicates that the model used for determination of lot sizes is of less importance than the decision rule used for identification of the item to produce and when to produce it

a test of the hotelling valuation principle time series tests of the hotelling r percent rule for natural resource prices have not been strongly supportive but the tests and the data are subject to serious difficulties we propose here an alternative testing strategy based on another but less widely known implication of the hotelling model we test this implication which we call the hotelling valuation principle by regressing the market values of the reserves of a sample of u s domestic oiland gas producing companies on their estimated hotelling values we find that the estimated hotelling values account for a significant portion of the observed variations in market values and that the hotelling measures are better indicators of the market values of petroleum properties than two widely cited publicly available alternative appraisals

optimal policies for inventory systems with finite capacity and partially observed markov modulated demand and supply processes we analyze a single item periodic review inventory system with random yield and finite capacity operating in a random environment the primary objective is to extend the model of gallego and hu 2004 to the more general case when the environment is only partially observable although our analysis is specific to inventory systems it can also be applied to production systems by replacing the fixed capacity supplier with a fixed capacity producer using sufficient statistics we consider single period multiple period and infinite period problems to show that a state dependent modified inflated base stock policy is optimal moreover we show that the multiple period cost converges to the infinite period cost as the length of the planning horizon increases

myopic policies for some inventory models with uncertain demand distributions the majority of papers on stochastic inventory theory make the assumption that the distribution of consumer demand in each time period is known with certainty while this assumption is unsupported in many applied contexts it is conventionally held that more realistic models are more difficult to solve and will not yield simple operational policies this paper shows that a simple inventory policy based upon a critical fractile can be optimal or near optimal in some inventory models with parameter adaptive demand processes in these some parameter of the demand distribution is not known with certainty and estimates of the parameter are updated in a statistical fashion as demand is observed through time examples include exponentially smoothed forecasts and bayesian updating of parameter estimates bounds on the value loss relative to optimal cost when using the critical fractile policy can be calculated directly from the problem data some numerical examples illustrate the technique

determination of an order up to policy in the stochastic economic lot scheduling model we consider a production inventory problem with compound renewal item demand the model consists of stockpoints one for each item controlled according to r s policies and one machine which replenishes them the replenishment orders are produced with a fixed rate on the machine with significant setup times and costs which are stochastic and sequence dependent the time between the release and the production of the replenishment order is called the waiting time we develop analytical approximations for the first two moments of this waiting time the order up to levels and the average physical inventory levels for all stockpoints given the target fill rates these analytical approximations allows for a quick evaluation of the waiting time which is important when optimization of the system is considered

using imperfect advance demand information in ordering and rationing decisions in this paper we consider an inventory problem with two demand classes having different priorities the appropriate policy of rationing the available stock i e reserving some stock for meeting prospective future demand of preferred customers at the expense of deliberately losing some of the currently materialized demand of lower demand class es relies on the estimation of the future demand utilizing current signals on future demand which we refer to as imperfect advance demand information adi decreases uncertainty on future demand and may help to make better decisions on when to start rejecting lower class demand we develop a model that incorporates imperfect adi with inventory ordering replenishment decision and rationing available stock in a two period setting we show some structural properties solve the rationing problem and propose solution methods based on monte carlo simulation for the ordering problem we conduct numerical tests to measure the impact of system parameters on the expected value of imperfect adi and provide useful managerial insights

a partially observed markov decision process for dynamic pricing in this paper we develop a stylized partially observed markov decision process pomdp framework to study a dynamic pricing problem faced by sellers of fashion like goods we consider a retailer that plans to sell a given stock of items during a finite sales season the objective of the retailer is to dynamically price the product in a way that maximizes expected revenues our model brings together various types of uncertainties about the demand some of which are resolvable through sales observations we develop a rigorous upper bound for the seller s optimal dynamic decision problem and use it to propose an active learning heuristic pricing policy we conduct a numerical study to test the performance of four different heuristic dynamic pricing policies in order to gain insight into several important managerial questions that arise in the context of revenue management

explaining the wealth holdings of different cohorts productivity growth and social security in this paper we explore the reasons why different generations accumulate different amounts of wealth we use basic economic theory to propose two indicators of the economic conditions under which households accumulate wealth the first one represents productivity differences across cohorts the aggregate level of gross national product per capita around the time the head of the household entered the labor market the second measure summarizes the changes in social security during the head of household s working life using panel data from the dutch socio economic panel we show that productivity growth can explain all the cohort effects present in income data while productivity growth and the generosity of social security can explain all the cohort effects present in household net worth we also find a limited offset of social security on wealth holdings

adaptive inventory control for nonstationary demand and partial information this paper examines several different policies for an inventory control problem in which the demand process is nonstationary and partially observed the probability distribution for the demand in each period is determined by the state of a markov chain the core process however the state of this core process is not directly observed only the actual demand is observed by the decision maker given this demand process the inventory control problem is a composite state partially observed markov decision process pomdp which is an appropriate model for a number of dynamic demand problems in practice managers often use certainty equivalent control cec policies to solve such a problem however this paper presents results that demonstrate that there are other practical control policies that almost always provide much better solutions for this problem than the cec policies commonly used in practice the computational results also indicate how specific problem characteristics influence the performance of each of the alternative policies

lead time minimization of a multi product single processor system a comparison of cyclic policies abstract the supply chain under consideration is a two echelon system consisting of a retailer and a manufacturer the n different products face stochastic demand at the retailer and are produced using a shared facility at the manufacturer production changeover involves setup time that is significantly higher than the processing time a cyclic polling model with exhaustive limited service policy from the networking literature is applied to the supply chain problem and the service limit values are obtained to minimize the lead time mathematically the exhaustive service policy gives least value but in practice we can set the service limit to values near the stability condition and obtain similar results other cyclic policies that take into consideration either the minimum lot size or the production quantity band or the idle time between cycles are also studied these are tested for different values of plant utilization and a comparison is drawn through simulation limitations of the model are discussed and possible extensions identified