common property rights as an endogenous response to risk in recent years considerable progress has been made in improving our understanding of rural institutions including property rights e g binswanger and rosenzweig on close inspection property rights often turn out to be multidimensional and complex bailey migot adholla et al despite the widely acknowledged advantages of private property rights regimes numerous authors have demonstrated the resiliency and surprising pervasiveness of common property rights bromley and chavas ciracy wantrup and bishop ostrom although variations in weather in general and rainfall in particular have often been recognized as important sources of production risk and thereby as important determinants of property rights almost all the attention has been directed to intertemporal variability virtually neglected have been the local spatial variability of rainfall and hence such important issues as a the extent to which the production risks of rural production covary from one local community to another b the behavioral and institutional adaptations to such environmental conditions and c implications for public policy several factors would seem to have contributed to the neglect of such issues a in the more heavily studied temperate and relatively humid zones of the world the local variability of rainfall is relatively small huff and shipp hutchison jackson johnson and dart mcconkey nicholaichuk and cutforth b there is a dearth of data from a multiplicity of weather stations in arid r gions c intertemporal variations of rainfall have been of greater interest than interregional ones and d because drought induced agricultural production shortfalls are generally associated with price increases price risk tends to offset production risk thereby lowering the overall importance of weather related risk for farm incomes however there is strong evidence from various arid and semiarid regions asars of the world that the local variability of rainfall is considerably greater than in the more temperate and humid areas thompson and wilson sharon 1972 1974 1979 1981 giovinetto 1972 1974 jackson such studies also show a that studies based on annual rainfall greatly understate the magnitude and impact of such variability over the relevant productive season of the year b that intertemporal and local variability tend to be rather highly correlated and c that in the more arid of asars rainfall may be insufficient for agriculture implying that only animal husbandry might be viable in such situations price changes are unlikely to offset production changes indeed in drought conditions animal herders are often forced to sell off their animals at low and falling prices distress sales implying that production and price risk are likely to compound rather than offset each other therefore income risk is bound to be considerably more important in the drier asars moreover with neither insurance nor credit markets accessible to asar residents for reasons identified by binswanger and rosenzweig the sharp terms of trade deterioration associated with drought often give rise to severe exchange entitlement failure and famine explaining why herders are especially prominent among those suffering from famine sen jeffrey nugent is a professor of economics at the university of southern california los angeles nicolas sanchez is an associate professor of economics college of the holy cross worcester massachusetts

the impact of sharing customer returns information in a supply chain with and without a buyback policy in this paper we examine a single period problem in a supply chain in which a stackelberg manufacturer supplies a product to a retailer who faces customer returns and demand uncertainty we show that the manufacturer incurs a significant profit loss with and without a buyback policy if it fails to account for customer returns in the wholesale price decision under the assumption that the retailer is better informed than the manufacturer on customer returns information we show that without a buyback policy the retailer prefers not to share if the manufacturer overestimates while it prefers to share customer returns information if the manufacturer underestimates this information if the manufacturer offers a buyback policy we have the opposite results we also discuss incentives to share the customer returns information and some of the issues that are raised in sharing this information

stuck on stubble the non market value of agricultural byproducts for diversified farmers in morocco diversified agricultural households often use byproducts of one activity as inputs for another for crop livestock farmers cereal production provides grain and crop residue where the latter can be used as livestock feed to properly assess the cost of introducing new technologies into such systems one must value the implicit cost of byproducts which is made difficult by missing byproduct markets we estimate the shadow value of non market crop stubble using household data from morocco and find that stubble accounts for around one quarter of the value of cereal production in a normal rainfall year and three quarters in a drought year

a closed form solution for a model of precautionary saving this paper analyses life cycle consumption plans and distinguishes between temporal risk aversion and intertemporal substitution the results assume that felicity functions are quadratic and that income follows a linear model with normally distributed errors stochastic dynamic programming then yields closed loop linear decision rules certainty equivalence no longer holds but instead households play a min max strategy against nature one finds a rationale for precautionary saving and a larger sensitivity of changes in consumption to income innovations

a unified theory of the dynamics of closed loop supply chains we investigate the dynamics of a closed loop supply chain with first order auto regressive ar 1 demand and return processes we assume these two processes are cross correlated the remanufacturing process is subject to a random triage yield remanufactured products are considered as goodas new and used to partially satisfy market demand newly manufactured products make up the remainder we derive the optimal linear policy in our closed loop supply chain setting to minimise the manufacturer s inventory costs we show that the lead time paradox can emerge in many cases in particular the auto and cross correlation parameters and variances of the error terms in the demand and the returns as well as the remanufacturing lead time all influence the existence of the lead time paradox finally we propose managerial recommendations for manufacturers

learning under fear of floating in recent years a large fraction of economies overcame the fear of floating we study a model that describes the policy of a central bank uncertain about whether currency depreciations cause output to expand textbook model or contract balance sheet model we conclude that the movement away from fear of floating may not be explained by bayesian or robust policies when the private sector anticipates the central bank s policy and endogenously determines the model central banks may fall in a learning trap an increase in financial volatility provides an escape to such trap that replicates patterns in the data

the effect of inventory record inaccuracy in information exchange supply chains abstract the goal of this paper is to quantify the impact of inventory record inaccuracy on the dynamics of collaborative supply chains both in terms of operational performance i e order and inventory stability and customer service level to do so we model an information exchange supply chain under shrinkage errors in the inventory item recording activity of their nodes present the mathematical formulation of such supply chain model and conduct a numerical simulation assuming different levels of errors results clearly show that inventory record inaccuracy strongly compromises supply chain stability particularly when moving upwards in the supply chain important managerial insights can be extracted from this analysis such as the role of benefit sharing strategies in order to guarantee the advantage of investments in connectivity technologies

risk management in gathering economies abstract this article extends the literature on the interplay of environmental risk and welfare into the setting of coastal fisheries gathering it reviews the sources of covariate and idiosyncratic production risk creating income shocks to gatherers and discusses the institutions that best mediate shocks across different settings we rely upon a principal agent framework between larva gathering agents employed by boat owning principals who supply seed to shrimp farms two datasets from a central american fishery are used to test the hypotheses concerning contractual performance across environments which contract provides the highest mean income and variation depends upon the underlying production catch data in the farm production records dataset with strong catch trends a simplified relative payments contract would perform better in reducing income risk in locations of stronger covariate shocks but at the price of significantly lower mean earnings for gatherers in areas of idiosyncratic shocks su

the management of risk informal trade in indonesia abstract small traders face risk and uncertainty in carrying out their business activities on the basis of a large scale survey on informal sector trade in central java indonesia the economic conditions of the informal trade sector and risk avoidance strategies of traders are analyzed in particular petty traders have to solve the traders dilemma by extracting themselves from the moral obligations of sharing and redistribution to relatives and neighbors inventory minimization by daily replenishment of stocks avoidance of long term credit and formalization of relations with government agencies are among the risk reduction strategies policy measures to aid petty traders in their endeavor to reduce risk and maintain their businesses are outlined

supply chain forecasting when information is not shared the operations management literature is abundant in discussions on the benefits of information sharing in supply chains however there are many supply chains where information may not be shared due to constraints such as compatibility of information systems information quality trust and confidentiality furthermore a steady stream of papers has explored a phenomenon known as downstream demand inference ddi where the upstream member in a supply chain can infer the downstream demand without the need for a formal information sharing mechanism recent research has shown that under more realistic circumstances ddi is not possible with optimal forecasting methods or single exponential smoothing but is possible when supply chains use a simple moving average sma method in this paper we evaluate a simple ddi strategy based on sma for supply chains where information cannot be shared this strategy allows the upstream member in the supply chain to infer the consumer demand mathematically rather than it being shared we compare the ddi strategy with the no information sharing nis strategy and an optimal forecast information sharing fis strategy in the supply chain the comparison is made analytically and by experimentation on real sales data from a major european supermarket located in germany we show that using the ddi strategy improves on nis by reducing the mean square error mse of the forecasts and cutting inventory costs in the supply chain

a measure of bullwhip effect in supply chains with a mixed autoregressive moving average demand process abstract in this paper we quantify the impact of the bullwhip effect the phenomenon in which information on demand is distorted as moving up a supply chain for a simple two stage supply chain with one supplier and one retailer assuming that the retailer employs a base stock inventory policy and that the demand forecast is performed via a mixed autoregressive moving average model arma 1 1 we investigate the effects of the autoregressive coefficient the moving average parameter and the lead time on the bullwhip effect

optimal monetary policy with an uncertain cost channel the cost channel of monetary transmission describes a supply side effect of interest rates on firms costs previous research has found this effect to vary both over time and across countries moreover the cyclical nature of financial frictions is likely to amplify the cost channel this paper derives optimal monetary policy in the presence of uncertainty about the true size of the cost channel in a min max approach the central bank derives an optimal policy plan to be implemented by a taylor rule it is shown that uncertainty about the cost channel leads to an attenuated interest rate setting behavior in this respect the brainard 1967 principle of cautious policy in the face of uncertainty continues to hold in both a bayesian and a min max framework

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

commons as insurance and the welfare impact of privatization abstract it is shown here that despite the efficiency gains from privatization when markets are incomplete all individuals may be made worse off by privatization even when the resource is equitably privatized such market incompleteness is common in the developing world and can explain the often encountered resistance to efficiency enhancing privatizing reforms especially in the case of village level landholdings and forests the advantage of common held property arises because of its superior insurance properties which tend to provide income maintenance in low states sufficient conditions are established under which any feasible insurance scheme under private property cannot ex ante pareto dominate allocations under the commons

interlinked markets and the cash crop food crop debate in land abundant tropical agriculture the purpose of this article is to illustrate how such institutions do arise in the african context under certain preconditions it is argued that the lack of a land market due largely to a non capitalist conception of property rights over land 3 along with other conditions to be examined below leads to the failure of labor and private sector credit markets in response indigenous institutions have evolved to cope with the market failures

an arima supply chain model this paper presents a multistage supply chain model that is based on autoregressive integrated moving average arima time series models given an arima model of consumer demand and the lead times at each stage it is shown that the orders and inventories at each stage are also arima and closed form expressions for these models are given the paper also discusses the causes of the bullwhip effect a phenomenon in which variation in demand produces larger variations in upstream orders and inventory this discussion reveals how different modeling can lead to different insights because they make different assumptions about the cause of the bullwhip effect these observations are used to develop managerial insights about reducing the bullwhip effect

estimating the elderly s returns on the farm evidence from cote d ivoire abstract it is often said that the elderly in rural developing countries are more valued by the members of the society one possible economic reason for the relative status of the elderly in rural areas is that they are likely to have accumulated substantial farm specific capital thus increasing the productivity of the farm this paper examines whether the elderly contribute to the agricultural profits of households in rural cote d ivoire in an uncertain environment we estimate the returns to having elders on the farm using panel data and find that farm specific experience mitigates the fall in profits in adverse environmental conditions particularly at the lower end of the profit distribution thereby contributing to reduce the variance of profits the results hold even after controlling for the level of household assets and household fixed effects and the presence of experienced female members

on risk transactions and economic development in the semiarid tropics recent interest in the institutions and production relations of tropical agriculture seem to hold promise for increased collaboration between economists and anthropologists in efforts to explain existing patterns of production and socioeconomic interaction this focus on customs and on the more formal institutional arrangements is encouraging given the continuing concern for food production in much of the semiarid tropics two recent papers are particularly germane to this growing literature h p binswanger and m r rosenzweig have offered a foundation for addressing the production relations in agriculture with a general focus on conditions in south asia more recently binswanger and j mcintire provide an explanation for the major institutions and customary features of production relations in three agroclimatic subzones of the land abundant tropics that have simple technology and high transport costs 2 they also offer predictions of how these institutions and features might change in response to the opening up of subsistence economies and to population growth our approach here is consistent with this recent work in several respects first it is explanatory in that we offer possible explanations for observed behavior in the land abundant tropics where agriculture is a mixture of cropping and livestock management second it is predictive in that we draw on economic theory to hypothesize likely changes in behavior in the face of institutional change finally it is offered in the interest of stimulating a concern for the institutional preconditions of economic development by such preconditions we have in mind the institutional arrangements that can stimulate the economic development process in particular we focus on the role of transactions in the economy we do not believe that there is anything intrinsically undesirable about transactions that are restricted to a circle of family and acquaintances on the contrary such transactions play an important

do farmers choose to be inefficient evidence from bicol abstract farming households that differ in their ability or willingness to take on risks are likely to allocate resources and effort among income producing activities differently with consequences for productivity in this paper we measure voluntary and involuntary departures from efficiency for rice producing households in the bicol region of the philippines we take advantage of a panel of observations on households from 1978 1983 and 1994 available monthly weather data and survey information on planting times allows us to create household specific measures of weather shocks which we use in our analysis we find evidence that diversification and input choices do affect efficiency outcomes among farmers although these effects are not dominant accumulated wealth past decisions to invest favorable market conditions and propitious weather are also important determinants of efficiency outcomes among bicol rice farmers our findings suggest that the costs of incomplete formal and informal insurance markets are higher for poorer farmers

a dynamic option value for institutional change marketable property rights in the sahel in this article we use dynamic programming methods to create an option value measure of the value of the institutional innovation of marketable property rights this measure has two properties that are important to understanding institutional change it is truly dynamic and it allows for agent heterogeneity in the case of west africa we find that the collapse of customary risk management institutions is a vital part of the demand for marketability rights as agents struggle to smooth income and consumption in its wake we find that the social efficiency implications of this demand for institutional innovation are ambiguous

insurance policies for monetary policy in the euro area in this paper we aim to design a monetary policy for the euro area that is robust to the high degree of model uncertainty at the start of monetary union and allows for learning about model probabilities using the data that has become available since then to this end we compare and ultimately combine bayesian and worst case analysis using four reference models developed at the ecb and estimated with pre emu synthetic data we start by computing the cost of insurance against model uncertainty that is the relative performance of worst case or minimax policy versus bayesian policy we find that maximum insurance across this range of models can be obtained at moderate costs costs are measured in terms of lower expected performance relative to a bayesian policy with flat priors further scrutiny however highlights three shortcomings of this worst case insurance policy i prior beliefs that would rationalize the minimax policy from a bayesian perspective indicate that such insurance is strongly oriented towards the model with highest baseline losses ii the minimax policy is not as tolerant towards small perturbations of policy parameters as the bayesian policy and iii the minimax policy offers no avenue for incorporating posterior model probabilities derived from data available since monetary union thus we propose preferences for robust policy design that reflect a mixture of the bayesian and minimax approaches these preferences referred to as intermediate ambiguity aversion incorporate model probabilities while still giving extra weight to the worst uncertain outcomes we show how the incoming emu data may then be used to update model probabilities and investigate the implications for policy design

farm to market transaction costs and specialisation in small scale agriculture explorations with a non separable household model using an integrated household model with endogenous transaction costs this article illustrates how even in the absence of risk the tension between gains from specialisation and corresponding increases in transaction costs may lead to enterprise diversification on small farms a numerical example illustrates that this tension may contribute to the prevalence of inter cropped cash crops on small farms in apparent disregard for foregone yield and income from greater specialisation involving pure stands by implication measures that augment households abilities to override trading costs may be critical complements to efforts seeking to raise productivity and incomes in small scale agriculture via increased specialisation

impact of market demand mis specification on a two level supply chain this paper investigates the impact of mis specifying the market demand process on a serially linked two level supply chain box jenkins models are used to represent both the true and a mis specified market demand processes it is shown that the impact of mis specification on cost is minor if the supply chain tries to minimise the market demand forecast errors furthermore our analysis suggests that mis specification does not always result in additional costs a managerial insight is revealed poor forecast accuracy is not always bad for the total supply chain costs in other words employing more accurate forecasting methods may actually result in higher total supply chain costs

on the relation between robust and bayesian decision making abstract this paper compares bayesian decision theory with robust decision theory where the decision maker optimizes with respect to the worst state realization for a class of robust decision problems there exists a sequence of bayesian decision problems whose solution converges towards the robust solution it is shown that the limiting bayesian problem displays infinite risk aversion and that decisions are insensitive robust to the precise assignment of prior probabilities this holds independently of whether the preference for robustness is global or restricted to local perturbations around some reference model

risk coping land tenure and land markets an overview of the literature over the last decades a significant amount of literature has been published on informal risk coping in developing countries in this paper we review how informal risk coping has been addressed in the land tenure literature from two main perspectives a first stream of research looks at how customary tenure and communal property perform key informal risk coping functions a second subset of this literature analyses how informal risk coping creates land market imperfections through sharecropping or distress sales the segmentation of the literature results from the demsetzian property rights framework further research on risk coping and land tenure would benefit from examining recent work on property regimes

the economics of cain and abel agro pastoral property rights in the sahel the complementarity of the economic systems of nomads and farmers is often overshadowed by the conflicts inherent in the competition over the control of land the conflict is one of property rights a dynamic programming model of the west african sahel is presented that simulates the emergence of a dual economy based on the comparative advantage of the farmer and the pastoralist the model illustrates that exclusive private property rights have no claim to optimality the analysis of risk in an intertemporal framework suggests the optimality of another type of property right the right to flexible adjustment typically claimed by the pastoralist multiple property regimes provide optimal settings for farmers and pastoralists

model uncertainty and intertemporal tax smoothing in this paper we examine how model uncertainty due to the preference for robustness rb aects optimal taxation and the evolution of debt in the barro tax smoothing model 1979 we rst study how the government spending shocks are absorbed in the short run by varying taxes or through debt under rb furthermore we show that introducing rb improves the model s predictions by generating i the observed relative volatility of the changes in tax rates to government spending ii the observed comovement between government decits and spending and iii more consistent behavior of government budget decits in the us economy finally we show that rb can also improve the model s predictions in the presence of multiple shocks

optimal centralized ordering policies in multi echelon inventory systems with correlated demands this paper treats a depot warehouse system in which demand occurs at the warehouse or retail level this work differs from a number of other studies in that we allow item demands to be correlated both across warehouses and also correlated in time our motivation for this generalization arises from our experience with an actual system of this type used by a major national producer and distributor of consumer products we observed both high correlations between successive monthly demands around 0 7 and correlations between demands for an item at different locations also about 0 7 in a given time period we derive an explicit expression for the optimal safety stock as a function of the level of correlation through time the analysis requires two assumptions 1 the allocation assumption and 2 the equal coefficient of variation assumption similar assumptions have been used by other researchers finally numerical evaluations are included to illustrate the impact of the various magnitudes of correlation

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

robust permanent income and pricing i suppose there exists an extremely powerful and if i may so speak malignant being whose whole endeavours are directed toward deceiving me rene descartes meditations ii 1

a selectivity model of household food marketing behavior in sub saharan africa the agricultural household s discrete decision of whether to participate in coarse grain markets is separated here from the continuous decision of how much to sell or buy conditional on participation failure to participate in markets results from high fixed transactions costs a selectivity model endogenously switches households into alternative market participation states correcting for bias caused by the exclusion of unobservable variables affecting both discrete and continuous decisions improved market information increases the probability of participation by sellers while access to cereals processing technology increases quantities transacted by both sellers and buyers conditional on participation

forecasting and inventory performance in a two stage supply chain with arima 0 1 1 demand theory and empirical analysis the arima 0 1 1 demand model has been analysed extensively by researchers and used widely by forecasting practitioners due to its attractive theoretical properties and empirical evidence in its support however no empirical investigations have been conducted in the academic literature to analyse demand forecasting and inventory performance under such a demand model in this paper we consider a supply chain formed by a manufacturer and a retailer facing an arima 0 1 1 demand process the relationship between the forecasting accuracy and inventory performance is analysed along with an investigation on the potential benefits of forecast information sharing between the retailer and the manufacturer results are obtained analytically but also empirically by means of experimentation with the sales data related to 329 stock keeping units skus from a major european superstore our analysis contributes towards the development of the current state of knowledge in the areas of inventory forecasting and forecast information sharing and offers insights that should be valuable from the practitioner perspective