optimal pricing and return policies for perishable commodities this paper considers the pricing decision faced by a producer of a commodity with a short shelf or demand life a hierarchical model is developed and the results of the single period inventory model are used to examine possible pricing and return policies the paper shows that several such policies currently in effect are suboptimal these include those where the manufacturer offers retailers full credit for all unsold goods or where no returns of unsold goods are permitted the paper also demonstrates that a policy whereby a manufacturer offers retailers full credit for a partial return of goods may achieve channel coordination but that the optimal return allowance will be a function of retailer demand therefore such a policy cannot be optimal in a multi retailer environment it is proven however that a pricing and return policy in which a manufacturer offers retailers a partial credit for all unsold goods can achieve channel coordination in a multi retailer environment this article was originally published in marketing science volume 4 issue 2 pages 166 176 in 1985

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

time and punishment an intertemporal model of crime if an increase in the rate at which a criminal commits crimes lowers the expected time until detection the income from crime net of expected fines must be discounted at a rate that varies with the crime rate this paper models the criminal s choice of the optimal crime rate under such conditions it is shown that irrespective of the criminal s attitude toward risk an increase in the probability of detection is more likely to deter crime than a comparable increase in penalties other implications of the model for the optimal enforcement of laws are also explored

the impact of customer returns on pricing and order decisions abstract in this paper we address the simultaneous determination of price and inventory replenishment when customers return product to the firm we examine cases when the quantity of returned product is a function of both the quantity sold and the price in single and multi period problems with and without uncertainty in demand we derive results for optimal prices and order quantities and discuss how the firm should change price and inventory quantities in order to mitigate the negative effects of returns from customers

channel coordination under price protection midlife returns and end of life returns in dynamic markets this paper examines three channel policies that are used in declining price environments price protection p is a mechanism under which the manufacturer pays the retailer a credit applying to the retailer s unsold inventory when thewholesale price drops during the life cycle midlife returns m allow the retailer to return units partway through the life cycle at some rebate and end of life returns e allow the retailer to return unsold units at the end of the life cycle under decliningretail prices if the wholesale prices and the return rebates are set properly then em i e midlife and end of life returns achieves channel coordination however such a policy may not be implementable because it may require the manufacturer to be worse off as a result of coordination if p is used in addition to em and the terms are set properly then pem guarantees both coordination and a win win outcome if theretail price is constant over time then em is sufficient to guarantee both coordination and a win win outcome

real effects of monetary policy in a world economy abstract we present a two country heterogeneous agent model in which changes in a country s monetary policy affect real interest rates relative prices of traded and nontraded goods and real exchange rates nontransitory real effects of monetary policy stem from legal restrictions in the form of country specific reserve requirements without violating the classical assumptions of individual rationality and flexible prices the model s implications seem qualitatively consistent with the u s experience of the 1980s a monetary policy tightening leading to a rise in the real interest rate and to an initial rise in the real value of the dollar which is subsequently reversed

burglary and income inequality abstract in a model where risk neutral agents have differing legal incomes which may be supplemented by burglary we study the effects of income distribution on the level of burglary assuming that a detected burglar is incarcerated for a fixed term and assuming that burglars choose target houses using the signal of house quality we show how increases in income inequality may increase the level of crime in particular increases in relative differential inequality unambiguously increase burglary crime corollaries are that a more regressive income tax increases the level of crime and that richer neighborhoods may have lower crime rates

why is production more volatile than sales theory and evidence on the stockout avoidance motive for inventory holding this paper argues that the macroeconomically interesting features of inventory behavior are well captured by a model in which firms face only demand uncertainty with a nonnegativity constraint on inventories empirical implications of the stockout avoidance model of inventory behavior are derived and then tested on disaggregated automobile industry data the results largely support the model though they suggest a small role for production smoothing as well subsidiary evidence on the relative variance of demand and cost shocks suggests that demand shocks are indeed more important

crime and local inequality in south africa the authors examine the effects of local inequality on property and violent crime in south africa their findings are consistent with economic theories relating inequality to property crime and also with sociological theories that imply that inequality leads to crime in general burglary rates are 20 30 percent higher in police station jurisdictions that are the wealthiest among their neighbors suggesting that criminals travel to neighborhoods where the expected returns from burglary are highest the authors do not find evidence that inequality between racial groups fosters interpersonal conflict at the local level

trend reverting fluctuations in the life cycle model abstract aggregate time series provide evidence of short term dynamic adjustment that appears to be governed by complex or negative real eigenvalues this finding is at odds with the predictions of reasonably parameterized convex one sector growth models with complete markets we study life cycle economies in which aggregate saving depends non trivially on the distribution of wealth among cohorts if consumption goods are weak gross substitutes near the steady state price vector we prove that the unique equilibrium of a life cycle exchange economy converges to the unique non monetary steady state via damped oscillations we also discuss examples and extensions

inequality reducing and inequality preserving transformations of incomes symmetric and individualistic transformations abstract this paper analyzes the redistributive effect of transformations of incomes when the same transformation is applied to all incomes following marshall and olkin lnequalities a theory of majorization and its applications academic press new york 1979 we consider two competing families of nested inequality criteria all of which are consistent with the lorenz ordering looking at the transformations that reduce the inequality of incomes we show that within each family all the criteria generate exactly the same class of transformations we next identify those transformations that preserve or convert a given inequality ranking into a finer ranking we finally find necessary and sufficient conditions to be imposed on a pair of transformations for the inequality ranking of distributions to be preserved journal of economic literature classification number d31 d63 h24

inequality and crime this paper considers the relationship between inequality and crime using data from urban counties the behavior of property and violent crime are quite different inequality has no effect on property crime but a strong and robust impact on violent crime with an elasticity above 0 5 by contrast poverty and police activity have significant effects on property crime but little on violent crime property crime is well explained by the economic theory of crime while violent crime is better explained by strain and social disorganization theories

development crime and punishment accounting for the international differences in crime rates abstract this paper analyzes the determinants of the heterogeneity in crime rates across countries focusing on reporting rates and development the behavior of the reporting rate is studied by comparing data from victimization surveys to official records reporting rates are strongly correlated with development richer countries report a higher fraction of crimes the positive relation between development and crime found in previous studies is shown to result from this correlation once the presence of the reporting error is accounted for development does not affect crime reductions in inequality and increases in growth and education are associated with reductions in crime rates

the design of direct taxation and family benefits abstract the subject of this paper is the design of the personal income tax and social security benefits that vary with the size of the family it is concerned with the analytical problems of policy design that arise from constraints on the instruments which may be used from differences in social judgements about the desirability of redistribution and from differences of view about the disincentive effects of taxation the paper considers these issues in the context of the french tax benefit system and the implications of the french system being harmonised towards certain features of the british system

the right to return this article studies the allocation of responsibility for unsold inventory provision for which is made in practically every distribution contract the two extreme cases are the consignment contract which allocates all the burden to the manufacturer and the no return contract in which retailers purchase the merchandise outright and assume responsibility for unsold inventory contract choices are shown to vary across countries industries products and types of transactions the article identifies six main factors affecting this choice optimal inventory policy in a stochastic retail demand environment relative advantage in disposing of the unsold inventory optimal risk allocation incentives to invest in promotions and provide services to increase consumer demand information asymmetry and costs associated with the consignment contract per se several testable implications are presented and the choice of contracts in the publishing industry is shown to be consistent with the predictions of the model

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

dollarization and the integration of international capital markets a contribution to the theory of optimal currency areas we consider the following questions 1 does the adoption of a common currency either reduce or enhance the scope for endogenously generated volatility to emerge 2 does the adoption of a common currency reduce or enhance the scope for indeterminacies to arise 3 is there a welfare justification for the adoption of a single currency 4 what are the fiscal consequences of a move to a single currency we address these issues in a two country model with both a transactions role and a store of value role for currency moreover banks arise endogenously in each country in this context we compare the determination and characteristics of an equilibrium in each of two situations one where each country issues its own currency and one where one of the countries adopts the currency of the other country the consequences of this dollarization depend very much on the degree of integration of the capital markets of the two countries when their credit markets are poorly integrated a regime with two currencies displays a unique stationary equilibrium dollarization under very weak conditions gives rise to a continuum of equilibrium paths these may exhibit oscillation hence when capital markets are segmented dollarization may be a source of indeterminacy and endogenously arising volatility in addition the welfare justifications for dollarization are weak and dollarization my have adverse fiscal consequences when credit markets are fully integrated internationally the results are substantially different in that case both regimes display a unique equilibrium path hence in the presence of unrestricted international capital flows the adoption of a common currency does

more inequality more crime a panel cointegration analysis for the united states abstract this study employs state level panel data to examine the effect of income inequality on crime in the united states using panel cointegration techniques we find a significant negative effect of inequality on crime

controlling opportunism in vertical contracting when production precedes sales in a make to stock vertical contracting setting with private contracts when retailers do not observe each other s stocks before choosing their prices an opportunism problem always exist in contract equilibria but public market wide resale price maintenance rpm can restore monopoly power however other widely used tools which do not fall under antitrust scrutiny and require only private bilateral contracts such as buyback contracts also allow the producer to fully exercise his monopoly power we conclude that a more lenient policy toward rpm is unlikely to affect the producer s ability to control opportunism

economic inequality and its socioeconomic impact abstract income inequality is of fundamental interest not only to economists but also to other social scientists a substantial literature in economics and the social sciences has investigated the relationship between income inequality and economic growth and a variety of social phenomena the links between inequality and economic growth are explored as well as those between inequality and such key social variables as political conflict education health and crime the analysis in this paper follows a two step process first a review of the empirical evidence relating inequality to growth and to each of the above social variables is undertaken second the various causal mechanisms that have been proposed in the social science literature to explain those links are surveyed

domestic burglaries and the real price of audio visual goods some time series evidence for britain this paper explores the relationship between the real price of audio visual goods and domestic burglaries using british data our findings suggest that the falling real price of these consumer goods has contributed to a reduction in domestic burglary activity

vertical price controls with uncertain demand a manufacturer distributes output before knowing demand and thus risks making more than its rivalrous independent retailers can sell at the monopoly price if demand is low retailers may therefore resell more than the joint profit maximizing output anticipating this they will not pay as much for the merchandise ex ante as they would if the manufacturer could commit to preventing rivalry the manufacturer has many options including vertical integration chain outlets restricted output buy backs just in time deliveries and minimum resale prices the article discusses each option s advantages and disadvantages and concludes that all roads lead to resale price maintenance the article closes with an alternative to the dealercartel hypothesis for minimum resale prices

crime punishment and background risks abstract we show that if the punishment for a property crime effectively eliminates an individual s initial wealth as with a very long prison sentence then such criminal activities become less desirable for a risk averse and prudent individual if his initial wealth distribution undergoes a second order stochastic dominant improvement similar results obtain under additional restrictions if the punishment reduces an individual s initial wealth by some factor less than 1 in a general equilibrium model where the endogenous victimization risk is part of individuals background risks we also show that the availability of insurance for the victimization risk lowers economy wide crime rates

neighbourhood income inequality and property crime this paper examines the relationship between income inequality and property crime using census block group data from three us cities nashville tn portland or and tucson az this paper is one o

product warranties and double moral hazard this article explores a model of warranties in which moral hazard problems play a key role the goal is to understand the important characteristics of warranties including their provision of incomplete insurance and the relationship between product quality and coverage we analyze a model in which buyers and sellers take actions that affect a product s performance since these actions are not cooperatively determined an incentives problem arises we characterize the optimal warranty contract and undertake comparative statics to determine the predicted correlation of warranty coverage and product quality

the implications of pooled returns policies abstract when selling products with highly uncertain demands and short life cycles it is common for a manufacturer to offer some form of returns policy to entice the distributors to increase their order quantities in this paper we consider a multi item returns policy called pooled or joint returns policy under which the distributor can return any combination of the products up to r percent of the total purchases across all products we analyze the distributor s optimal profit and order quantity under the pooled returns policy and compare these operating characteristics to the case when a single item non pooled returns policy is instituted under the non pooled returns policy the distributor can only return on individual items using item specific return limits we show an intuitive result that the distributor will always achieve a higher profit under the pooled policy however the manufacturer could actually obtain a lower profit under the pooled policy due to a counter intuitive result the distributor may order less under the pooled policy even though the pooled policy offers more flexibility this counter intuitive result motivates us to determine the conditions under which the distributor would order less under the pooled policy finally we develop a heuristic for determining the distributor s optimal order quantities associated with the n product case under the pooled policy

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

the market for street crime an economic analysis of victim offender interaction abstract this paper views the economic explanation of crime rates from a new perspective by explicitly deriving an economic model of the behavior of potential victims and considering the interaction of the behavior of potential victims with the behavior of offenders crime is produced through offenders supplying time in search of victims and victims demanding to expose themselves to the environment a model is set up in which the crime rate the probability of being a victim per unit of exposure time and the probability of finding a victim per unit of offenders search time are simultaneously determined the model leads us to distinguish the real crime rate the probability of being a victim per unit of exposure time from the nominal crime rate the number of crimes per capita the nominal crime rate can be inversely related to the real crime rate

a general equilibrium model of crime commission and prevention abstract the model developed in this paper features a general equilibrium specification of the relationships among criminals victims of crime and a law enforcement agency these relationships are employed to endogenously derive an explicit intuitively appealing technology of crime commission and prevention the solution to the present model is therefore obtained with a set of more elementary assumptions than the previous literature where arbitrary curvature assumptions are invoked

the optimal use of fines and imprisonment abstract this paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities these sanctions are analyzed separately as well as together first for identical risk neutral individuals and then for two groups of risk neutral individuals who differ by wealth when fines are used alone and individuals are identical the optimal fine and probability of apprehension are such that there is some underdeterrence if individuals differ by wealth then the optimal fine for the high wealth group exceeds the fine for the low wealth group when imprisonment is used alone and individuals are identical the optimal imprisonment term and probability may be such that there is either underdeterrence or overdeterrence if individuals differ by wealth the optimal imprisonment term for the high wealth group may be longer or shorter than the term for the low wealth group when fines and imprisonment are used together it is desirable to use the fine to its maximum feasible extent before possibly supplementing it with an imprisonment term the effects of risk aversion of these results are also discussed

a serial supply chain of newsvendor problem with safety stocks under complete and partial information sharing abstract we consider a supply chain where multiple members are serially connected the decision is to determine the ordering quantity of a member to the next upstream member in the supply chain the basic cost model is similar to the newsvendor problem with additional consideration to safety stock this paper presents optimal approaches for coordination of the supply chain under both complete and partial information sharing in order to maximize the total expected benefit for complete information sharing we develop an optimal coordination algorithm for partial information sharing we propose an optimal coordination algorithm based on the alternating direction method and the diagonal quadratic approximation method a numerical example is discussed to show the optimal convergence of ordering quantities and discuss the properties of the proposed algorithms

what to stabilize in the open economy we consider the question how best to maintain price level stability in an open economy and evaluate three possible policy choices a a constant money growth rate rule b a fixed exchange rate and c a policy of explicit commitment to a price level target in each case we assume that policy is conducted by injecting reserves into or withdrawing reserves from the banking system in evaluating the three regimes we adopt the criterion that the best policy should leave the least scope for indeterminacy and excessive economic volatility in a steady state equilibrium the choice of regime is largely irrelevant any steady state equilibrium under one regime can be duplicated by an appropriate choice of the control variable under any other regime however we show that the sets of equilibria under the three regimes are dramatically different when all countries follow the policy of fixing a constant rate of money growth there are no equilibria displaying endogenously arising volatility and there is no indeterminacy of equilibrium under a regime of fixed exchange rates indeterminacies and endogenously arising fluctuations are impossible if and only if the country with the low reserve to deposit ratio is charged with maintaining the fixed rate finally when one country targets the time path of its price level under very weak conditions there will be indeterminacy of equilibrium and endogenously arising volatility driven by expectations