improving supply chain performance and managing risk under weather related demand uncertainty we consider a manufacturer retailer supply chain for a seasonal product whose demand is weather sensitive the retailer orders from the manufacturer supplier prior to the selling season and then sells to the market we examine how a manufacturer can structure a weather linked rebate to improve his expected profit the proposed class of rebate contracts offers several advantages over many other contract structures including no required verification of leftover inventory and or markdown amounts and no adverse effect on sales effort by the retailer we provide a thorough analysis of the manufacturer s and retailer s decisions in this context we show that the weather linked rebate can take many different forms and this flexibility allows the supplier to design contracts that are pareto improving and or limit his risk in offering the contract and the retailer s risk in accepting it for weather rebates with certain characteristics the manufacturer can fully hedge his risks of offering a weather rebate by paying a risk premium we show how this can be accomplished we also show that the basic structural results extend to settings in which the two parties would like to limit their risk

optimal flexibility configurations in newsvendor networks going beyond chaining and pairing we study the classical problem of capacity and flexible technology selection with a newsvendor network model of resource portfolio investment the resources differ by their level of flexibility where level k flexibility refers to the ability to process k different product types we present an exact set theoretic methodology to analyze newsvendor networks with multiple products and parallel resources this simple approach is sufficiently powerful to prove that i flexibility exhibits decreasing returns and ii the optimal portfolio will invest in at most two adjacent levels of flexibility in symmetric systems and to characterize iii the optimal flexibility configuration for asymmetric systems as well the optimal flexibility configuration can serve as a theoretical performance benchmark for other configurations suggested in the literature for example although chaining is not optimal in our setting the gap is small and the inclusion of scale economies quickly favors chaining over pairing we also demonstrate how this methodology can be applied to other settings such as product substitution and queuing systems with parameter uncertainty

lessons from strange cases democracy development and the resource curse in the u s states the work linking natural resource wealth to authoritarianism and under development suffers from several shortcomings in this article the authors outline those shortcomings and address them in a new empirical setting using a new data set for the u s states spanning 73 years and case studies of texas and louisiana the authors are able to more carefully examine both the diachronic nature and comparative legs of the resource curse hypothesis than previous research has they provide evidence that natural resource dependence contributes to slower economic growth poorer developmental performance and less competitive politics using this empirical setting they also begin parsing the mechanisms that might explain the negative association between resource wealth and political and economic development they draw implications from intranational findings for resource abundant countries across the world and suggest directions for future cross national and cross state work

flexibility and uncertainty the preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk yet it is an important factor in decisions to hold liquid assets or delay irreversible investment this paper formalizes the notion of flexibility in a sequential decision context and relates its value to the amount of information an agent expects to receive a rudimentary money demand model is developed embodying these ideas and the history of flexibility as an economic concept is traced choices are frequently made between alternatives that imply different degrees of future commitment between a short term investment that leaves future options open for example and a long term one that by its very nature forecloses those options the relative attractiveness of the two depends on their probability distributions of payoffs over time a basic consideration in this choice is the recognition that beliefs about the risks governing these payoffs may change current doubts may be partially resolved in the near future this prospect decreases the attractiveness of the longer term commitment in that one is able to respond less fully to new information and even if it does not directly affect the risks associated with shorter term choices enhances their appeal this paper formalizes the above remarks by establishing connections between the following two partial orderings the first is an ordering based on variability of beliefs one set of beliefs is more variable than another if more final risk is resolved at an intermediate stage the more one expects to learn by an intermediate period relative to what one knows today the more variation one is anticipating in beliefs about the final outcome the second is an ordering of current actions or positions based on flexibility one position is more flexible than another if it leaves available a larger set of future positions at any given level of cost these two orderings are incorporated in a simple sequential decision model to suggest the following behavioural principle the more variable are a decision maker s beliefs the more flexible is the position he will choose this principle potentially applies whenever i there will be opportunities to act after further information is received and ii current actions influence either the attractiveness or availability of different future actions

the optimal mix of flexible and dedicated manufacturing capacities hedging against demand uncertainty abstract a firm that faces uncertain demands for several product groups needs to decide how much of relatively inexpensive dedicated capacity and how much of more expensive flexible capacity to acquire we model this situation as a two stage decision problem investment and allocation we pay particular attention to the dependence of acquisition policy on existing capacities as most firms facing the problem are not likely to be entirely new we show that if initial capacities are lower than the levels that would be optimal in absence of initial capacities the investment decision is a simple acquire up to optimal levels for each capacity type however if some initial capacity is too high the optimal additions to others depend on its value in a non linear yet intuitive fashion we also pose the issue of choosing the degree of flexibility as the realized product mix will affect the performance of partially flexible machines

single period multiproduct inventory models with substitution we study a single period multiproduct inventory problem with substitution and proportional costs and revenues we consider n products and n demand classes with full downward substitution i e excess demand for class i can be satisfied using product j for i j we first discuss a two stage profit maximization formulation for the multiproduct substitution problem we show that a greedy allocation policy is optimal we use this to write the expected profits and its first partials explicitly this in turn enables us to prove additional properties of the profit function and several interesting properties of the optimal solution in a limited computational study using two products we illustrate the benefits of solving for the optimal quantities when substitution is considered at the ordering stage over similar computations without considering substitution while ordering specifically we show that the benefits are higher with high demand variability low substitution cost low profit margins or low price to cost ratio high salvage values and similarity of products in terms of prices and costs

allocation of flexible and indivisible resources with decision postponement and demand learning we consider a firm that uses two perishable resources to satisfy two demand types resources are flexible such that each resource can be used to satisfy either demand type resources are also indivisible such that the entire resource must be allocated to the same demand type this type of resource flexibility can be found in different applications such as movie theater complexes cruise lines and airlines in our model customers arrive according to independent poisson processes but the arrival rates are uncertain thus the manager can learn about customer arrival rates from earlier demand figures and potentially increase the sales by postponing the resource allocation decision we consider two settings and derive the optimal resource allocation policy for one setting and develop a heuristic policy for the other our analysis provides managerial insights into the effectiveness of different resource allocation mechanisms for flexible and indivisible resources

supply capacity acquisition and allocation with uncertain customer demands we study a class of capacity acquisition and assignment problems with stochastic customer demands often found in operations planning contexts in this setting a supplier utilizes a set of distinct facilities to satisfy the demands of different customers or markets our model simultaneously assigns customers to each facility and determines the best capacity level to operate or install at each facility we propose a branch and price solution approach for this new class of stochastic assignment and capacity planning problems for problem instances in which capacity levels must fall between some pre specified limits we offer a tailored solution approach that reduces solution time by nearly 80 over an alternative approach using a combination of commercial nonlinear optimization solvers we have also developed a heuristic solution approach that consistently provides optimal or near optimal solutions where solutions within 0 01 of optimality are found on average without requiring a nonlinear optimization solver

volume flexibility and capacity investment under demand uncertainty the paper considers optimal capacity investment decisions under uncertainty taking a real options approach concerning the production decision we study a flexible and an inflexible scenario the flexible firm can costlessly adjust production over time with the capacity level as the upper bound while the inflexible firm fixes production at capacity level from the moment of investment onwards we find that the flexible firm invests in higher capacity than the inflexible firm where the capacity difference increases with uncertainty for the flexible firm the initial capacity utilization rate can be quite low especially when investment costs are concave and the economic environment is uncertain as to the timing of the investment there are two contrary effects first the flexible firm has an incentive to invest earlier because flexibility raises the project value second the flexible firm has an incentive to invest later because costs are larger due to the higher capacity level the latter effect dominates in highly uncertain economic environments our model being dynamic enables us to derive the at first sight counterintuitive result that an increase in capacity holding cost raises the capacity level the firm invests in

capacity investment under postponement strategies market competition and demand uncertainty we consider duopoly models where firms make decisions on capacity production and price under demand uncertainty capacity and price decisions are made respectively ex ante and ex post demand realizations the interplay between the timings of demand realization and production decision endows firms with different capabilities flexible firms can postpone production decisions until the actual demand curve is observed but inflexible firms cannot under general demand structures and cost functions we characterize the equilibrium for a symmetric duopoly and establish the strategic equivalence of price and quantity competitions when firms are flexible we investigate the stochastic order properties of capacity and profit and show that they both increase for a flexible firm when the market is more volatile we find that flexibility allows a firm to increase investment in capacity and earn a higher profit while benefiting customers by keeping the price in a narrower range strategic equivalence implies that

multi resource investment strategies operational hedging under demand uncertainty abstract consider a firm that markets multiple products each manufactured using several resources representing various types of capital and labor and a linear production technology the firm faces uncertain product demand and has the option to dynamically readjust its resource investment levels thereby changing the capacities of its linear manufacturing process the cost to adjust a resource level either up or down is assumed to be linear the model developed here explicitly incorporates both capacity investment decisions and production decisions and is general enough to include reversible and irreversible investment the product demand vectors for successive periods are assumed to be independent and identically distributed the optimal investment strategy is determined with a multi dimensional newsvendor model using demand distributions a technology matrix prices product contribution margins and marginal investment costs our analysis highlights an important conceptual distinction between deterministic and stochastic environments the optimal investment strategy in our stochastic model typically involves some degree of capacity imbalance which can never be optimal when demand is known

productivity growth in goods and services across the heterogeneous states of america i introduction the study of income and productivity convergence and structural transformation are central and recurring themes in economic growth research the u s states have been a fertile testing ground for many intellectual advances in these areas the closed economy assumptions of the underlying models notwithstanding the states offer compensating advantages such as being subject to the same macroeconomic policy while simultaneously exhibiting considerable heterogeneity along many dimensions of interest to growth researchers demographics composition of output quality of workforce tax policy natural resource endowments geography etc at the same time knowledge on multifactor productivity mfp growth which is central to many growth models remains sparse for u s states this is mainly due to lack of data on capital accumulation beyond the manufacturing sector this is unfortunate as an emerging body of work has begun to draw attention to the fact that the convergence of state level incomes has slowed down over the past two to three decades in the absence of adequate data at the state level it becomes difficult to further analyze this problem within a multisectoral framework in this study we seek to rectify this shortcoming by constructing and analyzing productivity growth for the broadly defined privately produced goods and service sectors at the state level and undertake both growth accounting and convergence analysis for the period 1980 2007 1 our primary innovation is the use of the dual growth accounting method which relies on factor prices rather than factor stocks to construct mfp growth to get a sense of the underlying heterogeneity in sectoral labor productivity growth consider the convergence plots displayed in figure 1 in figure 1 a we plot labor productivity growth in the nonfarm nonmining private sector between 1980 and 2007 against initial labor productivity there is some evidence of absolute convergence although weak in figures ib and 1c we repeat similar plots but now for the goods sector and for the private service sector separately here we see markedly different patterns while convergence in the goods sector is apparent for services it is quite the opposite moreover if one inspects the values on the vertical axes one can also infer large differences across states this is particularly true for goods where the difference between oregon or and montana mt was almost 7 annually as a result even though montana had slightly higher labor productivity in 1980 by 2007 oregon s productivity was at least five times higher even for the service sector where the range is much smaller the difference between connecticut ct and michigan mi was almost 2 annually as a result though both states began with almost similar values connecticut s labor productivity in services was 60 higher than michigan s by 2007 clearly these are large underlying regional differences these very different patterns motivate some of the questions that we try to answer in this study using our constructed series of mfp growth and its constituent variables we examine the sources of variations in labor productivity growth first we conduct an in depth growth accounting exercise to explore the relative importance of mfp growth versus factor accumulation for the two broad sectors across u s states this allows us to undertake traditional growth accounting exercises and also examine the sources of variations across states as the dual accounting approach relies on the construction of real wage growth and real user cost growth we also investigate the sectoral patterns for these two variables second we conduct convergence analysis at the sectoral level for labor productivity growth mfp growth as well as factor price growth we show that while the goods sector shows convergence both absolute and conditional on initial human capital we see no such evidence for the service sector

flexible capacity strategy with multiple market periods under demand uncertainty and investment constraint abstract we establish a flexible capacity strategy model with multiple market periods under demand uncertainty and investment constraints in the model a firm makes its capacity decision under a financial budget constraint at the beginning of the planning horizon which embraces n market periods in each market period the firm goes through three decision making stages the safety production stage the additional production stage and the optimal sales stage we formulate the problem and obtain the optimal capacity the optimal safety production the optimal additional production and the optimal sales of each market period under different situations we find that there are two thresholds for the unit capacity cost when the capacity cost is very low the optimal capacity is determined by its financial budget when the capacity cost is very high the firm keeps its optimal capacity at its safety production level and when the cost is in between of the two thresholds the optimal capacity is determined by the capacity cost the number of market periods and the unit cost of additional production further we explore the endogenous safety production level we verify the conditions under which the firm has different optimal safety production levels finally we prove that the firm can benefit from the investment only when the designed planning horizon is longer than a threshold moreover we also derive the formulae for the above three thresholds

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

inequality and growth in the united states why physical and human capital matter we investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation using an annual panel of u s state level data our analysis is based upon the unified framework offered by galor and moav 2004 while the empirics account for cross section dependence parameter heterogeneity and endogeneity in nonstationary series we conclude that changes in inequality do not influence growth neither in the short run nor in the long run in the united states as a whole in the 1929 2013 period our findings are robust to the inclusion of overall income inequality measures these findings provide support for the theoretical prediction of the unified theory of inequality and growth according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the united states experiences during our period of investigation therefore future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the united states jel i21 o47 c23

heterogeneous vertical tax externalities and macroeconomic effects of federal tax changes the role of fiscal advantage abstract how do state tax rates respond to federal tax shocks this paper presents a novel mechanism of heterogeneous vertical tax externalities across state levels of fiscal advantage showing that tax increases can be expansionary even without their reinvestment states rich in natural resources have a fiscal advantage in the inter state competition over production factors which allows them to respond better to increases in federal taxes and consequently attract capital from other parts of the nation we add heterogeneity in fiscal advantage levels to an otherwise standard model of vertical tax externalities and horizontal tax competition the model shows that irrespective of federal redistribution the contractionary effect of a federal tax increase can be overturned in fiscally advantaged states through an increase in their tax base using the case of the u s and narrative based measures of federal tax shocks a la romer and romer 2010 we provide empirical evidence for the various aspects of this mechanism specifically our baseline estimates indicate that controlling for federal transfers a 1 increase in the gdp share of capital related federal taxes at the beginning of a year increases the growth rate of the per capita tax base by approximately 0 7 in high fiscal advantage states at the end of it

investment and capacity choice under uncertain demand this paper extends the real options literature by discussing an investment problem where a firm has to determine optimal investment timing and optimal capacity choice at the same time under conditions of irreversible investment expenditures and uncertainty in future demand after the project is installed with a certain maximum capacity this capacity is fixed as an upper boundary to the output and cannot be adjusted later on it turns out that in the framework of this once and for all decision uncertainty in future demand leads to an increase in optimal installed capacity but on the other hand it causes investment to be delayed to an extent that even small uncertainty makes waiting and accumulation of further information the optimal decision for large ranges of demand limiting the capacity which may be installed weakens this extreme effect of uncertainty

dynamic capacity planning using strategic slack valuation in this paper we analyze a particular aspect of capacity planning that is concerned with the active trading of production facilities for a homogenous product market we provide a theoretical rationale for the valuation and trading of these assets based on a metric of strategic slack we show that trading production assets with non additive portfolio profitability involves complex coordination with multiple equilibria and that these equilibria depend on the foresight in the planning horizon using the concept of strategic slack we have analyzed the dynamics of market structure the impact of asset trading on the level of production of the industry and to derive boundaries on the value of the traded assets moreover through computational learning the formulation is applied to a large oligopolistic electricity market showing that plant trading tends to lead to increased market concentration high prices lower production and a decrease in consumer surplus

imperfect mobility of labor across sectors a reappraisal of the balassa samuelson effect this paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two sector open economy model with imperfect substitutability in hours worked across sectors the balassa samuelson 1964 model predicts that a rise in the sectoral productivity ratio by 1 raises the relative price of non tradables by 1 while leaving the non traded wage traded wage ratio unchanged applying cointegration methods to a panel of fourteen oecd countries over the period 1970 2007 our estimates show that the relative price rises by only 0 78 and the relative wage falls by 0 27 while our first set of empirical findings cast doubt on the quantitative predictions of the balassa samuelson model our second set of evidence highlights the role of imperfect labor mobility the relative price responds more to a productivity differential between tradables and non tradables while the reaction of the relative wage is more muted in countries with higher intersectoral reallocation of labor we show that the ability of the two sector model to account for our evidence quantitatively relies upon two ingredients i imperfect mobility of labor across sectors and ii physical capital accumulation finally our numerical results reveal that the model predicts the relative price response fairly well and to a lesser extent the relative wage response

the determinants of u s state economic growth a less extreme bounds analysis this study investigates u s state economic growth from 1970 to 1999 i innovate on previous studies by developing a new approach for addressing model uncertainty issues associated with estimating growth equations my approach borrows from the extreme bounds analysis approach of leamer while also addressing concerns raised by granger and uhlig sala i martin and others that not all specifications are equally likely to be true i then apply this approach to identify robust determinants of state economic growth my analysis confirms the importance of productivity characteristics of the labor force and industrial composition of a state s economy i also find that policy variables such as 1 size and structure of government and 2 taxation are robust and economically important determinants of state economic growth jel 040 051 h10 h20 h30 h70 r11 r58 c51

default risk yield spreads and time to maturity this paper extends the default model of yield spreads for bonds by showing that in gen eral they are a complex function of maturity and in particular are not always monotoni cally increasing contrary to what one traditional view suggests our results may help explain the apparently conflicting empirical results found in the literature

optimal investment strategies for flexible resources considering pricing and correlated demands we study the optimal resource investment decision faced by a two product price setting firm that operates in a monopolistic setting and employs a postponed pricing scheme the firm has the option to invest in dedicated resources as well as a more expensive flexible resource that can satisfy both products while the resource investment decision is made under demand uncertainty pricing and resource allocation decisions are postponed to the time when demand curves are realized our analysis provides the structure of the firm s optimal resource investment strategy as a function of demand parameters and investment costs and shows that the flexible resource investment decision follows athreshold policy we also show that it can be optimal for the firm to invest in the flexible resource even when demand patterns are perfectly positively correlated the reason for flexible capacity investment in this case is financial rather than risk pooling on the other hand we show that it can be optimal for the firm not to invest in the flexible resource even when demand patterns are perfectly negatively correlated the flexible resource investment decision in this case depends on the profitability of the two products based on our analysis we provide principles on the firm s optimal resource investment decision

resource flexibility with responsive pricing this article studies two types of flexibility used by firms to better respond to uncertain market conditions resource flexibility and responsive pricing we consider a situation in which a single flexible resource can be used to satisfy two distinct demand classes while the resource capacity must be decided based on uncertain demand functions the resource allocation as well as the pricing decision are made based on the realized demand functions we characterize the effects of two key drivers of flexibility demand variability and demand correlation assuming normally distributed demand curve intercepts demand variability creates opportunity costs and with fixed prices decreases the firm s profit we show that with the additional flexibility gained from responsive pricing the firm can maximize the benefits of favorable demand conditions and mitigate the effects of poor demand conditions ultimately profiting from variability positive demand correlation on the other hand remains undesirable under responsive pricing the optimal capacity of the flexible resource is always increasing in both demand variability and demand correlation this contrasts with the scenarios based on fixed prices highlighting the crucial difference that responsive pricing makes in the management of flexible resources we further quantify the value of flexibility for the firm and its customers by considering as a benchmark a firm relying on two dedicated resources the value of flexibility is most significant if the demand levels are highly variable and negatively correlated in such cases the firm benefits from demand variability due to responsive pricing while facing limited demand risk due to resource flexibility finally we endogenize the input price of the flexible resource by considering the pricing decision of the resource supplier

corruption is bad for growth even in the united states we estimate the impact of corruption on growth of output per worker in u s states we improve on existing studies of the cost of corruption by using a better specified empirical model focusing on a study population that is less likely to be affected by parameter heterogeneity and controlling for endogeneity using political variables to instrument for corruption we find that corruption plays a significant and causal role in lowering growth and investment across the states

valuing flexibility as a complex option this paper develops an approach for valuing flexible production systems using contingent claims pricing demand curves for our model s underlying assets output products may be downward sloping in contrast with the standard option pricing assumption also our marginal production exercise costs may be increasing in addition we allow for multiple products and a production capacity constraint these elements of the model result in complex exercise decisions for the contingent claims which comprise the production system s value we illustrate our approach by valuing a flexible system that produces two products which have profit margin functions with stochastic parameters

the impact of budget constraints on flexible vs dedicated technology choice this paper studies the flexible versus dedicated technology choice and capacity investment decisions of a multiproduct firm under demand uncertainty in the presence of budget constraints the firm operates under a capital budget for financing the capacity investment and an operating budget which is uncertain in the capacity investment stage for financing the production we investigate how the tightening of the capital budget and a lower financial flexibility in the production stage the likelihood of having a sufficient operating budget shape the optimal technology choice we find that the dominant regime is one where dedicated technology should be adopted for a larger investment cost range and thus is the best response to the tighter capital budget whereas flexible technology is the best response to lower financial flexibility we identify the key roles that the capacity intensity the ratio of unit capacity cost to total unit capacity and production cost of each technology and the pooling value

capacitated multi item inventory systems with random and seasonally fluctuating demands implications for postponement strategies we address multi item inventory systems with random and seasonally fluctuating and possibly correlated demands the items are produced in two stages each with its own lead time in the first stage a common intermediate product is manufactured the production volumes in the first stage are bounded by given capacity limits we develop an accurate lower bound and close to optimal heuristic strategies of simple structure the gap between them evaluated in an extensive numerical study is on average only 0 45 we use the model to investigate the benefits of various delayed product differentiation postponement strategies as well as other strategic questions including i the benefits of flexible versus dedicated production facilities ii the trade off between capacity and inventory investments and iii the trade off between capacity investments and service levels

an innovative approach for strategic capacity portfolio planning under uncertainties abstract this research studies multi generation capacity portfolio planning problems under various uncertainty factors these uncertainty factors include price uncertainties demand fluctuation and uncertain product life cycle the objective of this research is to develop an efficient algorithm that generates capacity portfolio policies robust to aforementioned uncertainties we model this capacity portfolio planning problem using markov decision processes mdp in this mdp model we consider two generation of manufacturing technology the new generation capacity serves as a flexible resource that can be used to downward fulfill the deficiency of old generation capacity the objective of this mdp model is to maximize the expected profit under uncertainties an efficient algorithm is proposed to solve the problem and provide an optimal capacity expansion policy for both types of capacity moreover we show that the optimal capacity expansion policy can be characterized by a monotone structure we verify our results by detail simulation study

the impact of default risk on the prices of options and other derivative securities abstract this paper presents a model for valuing derivative securities when there is default risk the holder of a security is assumed to recover a proportion of its no default value in the event of a default by the counterparty both the probability of default and the size of the proportional recovery are random the paper shows how data on bonds issued by the counterparty can be used to provide information about model parameters

income convergence among u s states cross sectional and time series evidence we perform convergence tests on the u s states for per capita income from 1930 to 2009 cross sectional tests support overall convergence and convergence but may not hold true for the last three decades time series tests suggest that about half of the states exhibit stochastic convergence and of these all are also converging probit regressions reveal that the likelihood a state is converging is a function of changing capital to labour ratios the size of the agricultural sector and levels of taxation and tax revenue regional disparities in convergence remain among the southern and midwestern states convergence des niveaux de revenus entre les etats americains resultats a partir de donnes transversales et de series chronologiques on presente des tests de convergence des revenus per capita des etats americains entre 1930 et 2009 les tests transversaux supportent l hypothese de convergence de type et de type mais pourraient ne pas tenir pour les trois dernieres decennies les tests utilisant les series chronologiques suggerent que la moitie des etats montrent une convergence stochastique et que de ceux ci tous supportent l hypothese de convergence de type des regressions par la methode probit revelent que la vraisemblance qu un etat converge depend des rapports capital travail changeants de la taille du secteur agricole et des niveaux de taxation et de rentrees fiscales des disparites regionales dans la convergence demeurent entre les etats du sud et du midwest

taxes default risk and yield spreads this paper develops a model of bond prices and yield spreads that incorporates the effect of both taxes and differences in default probabilities the tax loss consequences of default are recognized traditionally tax free municipal bond yields have been viewed as linearly related to taxable yields with a slope coefficient equal to one minus the tax rate and the intercept representing differences in default risk while our model supports the linearity assumption it implies that the slope and intercept are both functions of both the break even tax rate and the default probability ies clientele effects among both municipal and taxable bonds are demonstrated finally the implied marginal tax rates and the implied default probabilities are estimated for different categories of municipal bonds students of financial markets cannot help but be impressed by the number of new financial instruments that have been introduced successfully in recent years the fixed income market has been particularly innovative as bonds carrying a whole host of specific features have been successfully marketed bonds with small or zero coupons variable coupon rates or detachable warrants are three examples from among an expanding list of such features not surprisingly there has developed a large and expanding literature attempting to explain the rate spreads between different fixed income securities this literature has evolved much as one would expect early empirical work was in general not well founded in theory and was not based on an underlying expected return price model later empirical research has tended to be more careful in its specification of factors affecting yield spreads and as a consequence better founded in valuation

who benefits from transshipment exogenous vs endogenous wholesale prices this paper studies how transshipments affect manufacturers and retailers considering both exogenous and endogenous wholesale prices for a distribution system where a single manufacturer sells to multiple identical cost retailers we consider both the manufacturer being a price taker and the manufacturer being a price setter in a single period setup under multivariate normal demand distribution in the case of the manufacturer being a price taker we provide several analytical results regarding the effects of key parameters on order quantities and profits in the case of the manufacturer being a price setter we characterize the stackelberg game that arises and provide several insights into how the game dynamics are affected by transshipments specifically we find that risk pooling makes retailers order quantities less sensitive to the wholesale price set by the manufacturer hence in general the manufacturer benefits from retailers transshipments by charging a higher wholesale price while retailers are often worse off the paper captures the effect of demand correlation and the effect of the number of retailers throughout and it illustrates the findings by a numerical example we also provide an interactive web page for numerical experiments

the effect of immigration on productivity evidence from us states abstract in this paper we analyze the long run impact of immigration on employment productivity and its skill bias we use the existence of immigrant communities across u s states before 1960 and the distance from the mexican border as instruments for immigration flows we find no evidence that immigrants crowded out employment at the same time we find that immigration had a strong positive association with total factor productivity and a negative association with the high skill bias of production technologies the results are consistent with the idea that immigrants promoted efficient task specialization thus increasing tfp and also promoted the adoption of unskilled efficient technologies

monetary policy natural resources and federal redistribution can monetary policy shocks induce redistribution across natural resource rich and poor states within a federation we conjecture that resource rich states are capital intensive hence their investment is more responsive to changes in monetary policy consequently contractionary monetary policy shocks e g increases in the interest rate may induce redistribution from resource poor states to resource rich ones via an equalizing federal transfer scheme because investment is reduced more strongly in the latter we test these hypotheses using a panel of u s states covering several decades and find that 1 resource rich states are significantly and persistently more capital intensive 2 contractionary monetary policy shocks induce a relative drop increase in investment federal transfers in resource rich states over the course of four years 3 these patterns are driven by resource induced differences in the capital share in the economy we estimate that a one standard deviation contractionary monetary shock induces within the first year federal redistribution of approximately 2 5 billion from the resource poor to the resource rich states representing about 11 of the total average annual federal transfers received by the latter states

comparative statics analysis of multiproduct newsvendor networks under responsive pricing we propose a novel analytic approach for the comparative statics analysis of multiproduct multiresource newsvendor networks under responsive pricing our approach involves exploiting the properties of the primal mathematical programming formulation and of the dual variables and linking those properties to the concept of convex orders and to properties of the underlying demand function the use of convex orders allows us to establish our main results without restriction to a specific demand distribution a major strength of our approach is that it is scalable i e it applies to newsvendor networks with any number of nonindependent i e demand or resource sharing products and resources without an exponential increase in effort as problem size increases this is unlike the current approaches commonly used in the operations management literature which typically involve a parametric analysis of the recourse problem followed by the use of jacobians and the implicit function theorem providing a rigorous framework for comparative statics analysis which can be applied to other problems that are not amenable to traditional parametric analysis is our main contribution we demonstrate this approach on the optimal capacity decision problem in multiproduct newsvendor networks under responsive pricing formulated as a two stage stochastic programming problem with recourse the firm determines the resource capacities ex ante in the first stage when demand intercepts are uncertain and makes the pricing and production decisions ex post in the second stage when demand intercepts e g market conditions are fully observed this particular problem and its variants are well studied in the operations management literature a comparative statics analysis is integral to the study of the capacity investment decision as it allows answers to important questions such as the following does the firm acquire more or less of the different resources available as demand uncertainty increases does the firm benefit from an increase in demand uncertainty using our proposed approach we establish comparative statics results on how the newsvendor s expected profit and optimal capacity decision change with demand risk in multiproduct multiresource newsvendor networks we also extend our analysis to the study of demand dependence in two product networks

racial diversity and macroeconomic productivity across us states and cities sparber c racial diversity and macroeconomic productivity across us states and cities regional studies racial diversity in the usa continues to rise past analyses have argued that diversity can have both positive and negative consequences the overall macroeconomic effects of diversity within the usa require further examination this paper exploits variation across us regions from 1980 to 2000 to determine whether racial heterogeneity creates gains or losses for states and cities fixed effects analysis indicates that diversity enhances the productivity of cities evidence at the state level is more ambiguous as significant results only appear in random effects specifications sparber c la diversite ethnique et la productivite macroeconomique a travers les etats et les grandes villes aux e u regional studies aux etats unis la diversite ethnique est toujours a la hausse des etudes anterieures ont cherche a affirmer que les consequences de la diversite ethnique peuvent s averer a la fois positives

solow and the states new evidence yamarik s 2006 solow and the states new evidence regional studies 40 571 582 the aim of this study is to reassess the sources behind us state level growth during the post war period it improves upon the existing literature 1 by using a general method of moments gmm estimator that eliminates omitted variable and endogeneity bias 2 by allowing for parameter heterogeneity and 3 by extending the sample to the pre and post productivity slowdown periods unlike previous regional growth studies the paper supports both predictions of neoclassical growth theory first strong evidence of convergence in state level growth rates is found second the rate of convergence and capital share are inversely related moreover numerical computations show that the estimated values for the convergence rate and capital share are consistent with the neoclassical growth model yamarik s 2006 solow et les etats de nouvelles preuves regional studies 40 571 582 cette etude cherche a reevaluer les origine

regional convergence evidence from a new state by state capital stock series this paper seeks to reconcile the growth empirics technique of mankiw romer and weil 1992 with the empirical results of barro and sala i martin 1991 through the development of a new database covering the 1977 96 period we create state by state capital stock and gross investment estimates by apportioning the national capital stock among the states using these estimates along with gross state product and employment data we find evidence that the solow growth model explains state wide growth during this period we consistently find a rate of convergence of around 2 our results as a consequence suggest that the empirical results of barro and sala i martin are driven by the neoclassical growth process of solow

term structure effects on default risk premia and the relationship of default risky tax exempt yields to risk free taxable yields a note abstract the behavior of the default risk premium on bonds has caught the attention of many researchers some researchers have analyzed how default risk premia may vary with maturity it has been suggested that default risk premia are independent of maturity however recent research by rodriguez 1988 shows this to not hold for nonpar taxable bonds this research shows that the shape of the underlying term structure affects default risk premia for even par bonds in a systematic way furthermore the maturity dependent variation in equilibrium tax rates has a strong impact upon default risk premia behavior where equilibrium tax rates are derived from comparisons of taxable and tax exempt bonds the inclusion of the shape of the underlying term structure also has very important implications for the relation between taxexempt yields and taxable yields the slope and intercept terms of the relation between taxexempt and taxable yields are clearly dependent upon maturity a fact which has not been recognized before

managing flexible capacity in a make to order environment flexible capacity has been shown to be very effective to hedge against forecast errors at the investment stage in a make to order environment this flexibility can also be used to hedge against variability in customer orders in the short term for that purpose production levels must be adjusted each period to match current demands to give priority to the higher margin product or to satisfy the closest customer however this will result in swings in production inducing larger order variability at upstream suppliers and significantly higher component inventory levels at the manufacturer through a stylized two plant two product capacitated manufacturing setting we show that the performance of the system depends heavily on the allocation mechanism used to assign products to the available capacity although managers would be inclined to give priority to higher margin products or to satisfy customers from their closest production site these practices lead to greater swings in production result in higher operational costs and may reduce profits

design for postponement a comprehensive characterization of its benefits under unknown demand distributions recent papers have developed analytical models to explain and quantify the benefits of delayed differentiation and quick response programs these models assume that while demands in each period are random they are independent across time and their distribution is perfectly known i e sales forecasts do not need to be updated as time progresses in this paper we characterize these benefits in more general settings where parameters of the demand distributions fail to be known with accuracy or where consecutive demands are correlated here it is necessary to revise estimates of the parameters of the demand distributions on the basis of observed demand data we analyze these systems in a bayesian framework assuming that our initial information about the parameters of the demand distributions is characterized via prior distributions we also characterize the structure of close to optimal ordering rules in these systems for a variety of types of order cost functions

strategic facility location capacity acquisition and technology choice decisions under demand uncertainty robust vs non robust optimization approaches abstract this paper presents a robust optimization ro modeling approach to develop insights into strategic capacity planning and resource acquisition decisions including the facility location problem and the technology choice problem the main purpose of the proposed model and numerical experiments is to examine the effects of economies of scale economies of scope and the combined effects of scale and scope under uncertain demand realizations using robust optimization the type of capacities or technology alternatives that a firm can acquire can be classified on two basic dimensions the first dimension relates to the effects of scale via distinction between labor intensive technologies and capital intensive technologies the second dimension relates to the effects of scope via distinction between product dedicated and flexible technologies moreover each product dedicated and flexible technology can have different levels of labor or capital intensity leading to the joint effects of economies of scale and economies of scope extensive computational results document how the optimal technology choice patterns depend on the cost structures and levels of model robustness specified to accommodate uncertain demand realizations the results obtained by the two stage robust optimization approach are compared to the results obtained by a non robust approach

transshipment and its impact on supply chain members performance this note extends some of the key results of dong and rudi 2004 to general demand distributions this generalization is achieved in two steps first we build on the analysis of dong and rudi to demonstrate that an inventory problem with transshipment is equivalent to a newsvendor problem with an adjusted demand then we study the impact of transshipment by comparing the adjusted demand with the original demand in addition to extending the results in the existing literature this note presents a novel approach for analyzing the impact of risk pooling

technology selection and capacity investment under uncertainty abstract we analyze the problem of technology selection and capacity investment for electricity generation in a competitive environment under uncertainty adopting a nash cournot competition model we consider the marginal cost as the uncertain parameter although the results can be easily generalized to other sources of uncertainty such as a load curve in the model firms make three different decisions i the portfolio of technologies ii each technology s capacity and iii the technology s production level for every scenario the decisions related to the portfolio and capacity are ex ante and the production level is ex post to the realization of uncertainty we discuss open and closed loop models with the aim to understand the relationship between different technologies cost structures and the portfolio of generation technologies adopted by firms in equilibrium for a competitive setting to the best of our knowledge this paper is the first not only to explicitly discuss the relation between costs and generation portfolio but also to allow firms to choose a portfolio of technologies we show that portfolio diversification arises even with risk neutral firms and technologies with different cost expectations we also investigate conditions on the probability and cost under which different equilibria of the game arise

coordinating the resource investment decision for a two market price setting firm abstract we study the capacity investment decision of a two product firm that is a price setter for both products the products are of varying complexities such that the resource that can be used to produce the higher level product can also be used to produce the lower level one but not vice versa although the firm needs to make its capacity investment decision under demand uncertainty it can utilize this limited downward resource flexibility in addition to pricing to more effectively match its supply with demand as an example consider a firm that owns a main plant satisfying both end product and intermediate product demand and a subsidiary satisfying the intermediate product demand only we formulate this decision problem as a two stage stochastic programming problem with recourse and analyze the impact of coordinated decision making when the resource flexibility is taken into account in the investment decision and demand correlation on the firm s optimal investment strategy our results offer managerial principles on the firm s optimal resource investment strategy

the convergence of u s state level energy intensity abstract this study extends a neoclassical growth model to include the accumulation of physical capital and energy consumption within a panel of fifty states plus the district of columbia in the u s the theoretical model allows us to examine the implications for convergence in economic growth and energy intensity from the theoretical model we formulate an empirical approach using a dynamic panel model that is estimated using a general method of moments framework to test the conditional rates of convergence the empirical results indicate convergence in energy intensity and our estimates accurately predict both the growth in and convergence of energy intensity across our entire sample consistent with other findings in the literature our results imply that energy use over the past four decades plays a small and positive role in state level per capita economic growth and convergence based on these results we discuss policy implications for state level income growth and energy consumption

environmental regulation and u s states technical inefficiency abstract using data on 48 states from 1982 1994 we estimate the impact of environmental regulation on technical inefficiency of u s states manufacturing sector the result indicates that environmental stringency has significant and positive impacts on u s states technical inefficiency

strategic technology choice and capacity investment under demand uncertainty this paper studies the impact of competition on a firm s choice of technology product flexible or product dedicated and capacity investment decisions specifically we model two firms competing with each other in two markets characterized by price dependent and uncertain demand the firms make three decisions in the following sequence choice of technology technology game capacity investment capacity game and production quantities production game the technology and capacity games occur while the demand curve is still uncertain and the production game is postponed until after the demand curve is revealed we develop best response functions for each firm in the technology game and compare how a monopolist and a duopolist respond to a given flexibility premium we show that the firms may respond to competition by adopting a technology which is the same as or different from what the competitor adopts we conclude that contrary to popular belief flexibility is not always the best response to competition flexible and dedicated technologies may coexist in equilibrium we demonstrate that as the difference between the two market sizes increases a duopolist is willing to pay less for flexible technology whereas the decision of a monopolist is not affected further we find that a firm that invests in flexibility benefits from a low correlation between demands for two products but the extent of this benefit differs depending on the competitor s technology choice our results indicate that higher demand substitution may or may not promote the adoption of flexibility under competition whereas it always facilitates the adoption of flexibility without competition finally we show that contrary to intuition as the competitor s cost of capacity increases the premium a flexible firm is willing to pay for flexibility decreases

dedicated vs product flexible production technology strategic capacity investment choice this paper studies the optimal investment strategies of an incumbent and a potential entrant that can both choose between a product flexible and dedicated technology in a two product market characterized by uncertain demand the product flexible production technology has certain advantages especially when the economic environment is uncertain on the other hand the dedicated production technology allows a firm to commit to production quantities this gives strategic advantages which can outweigh the value of flexibility it turns out that both firms prefer for some scenarios the dedicated production technology however we find that in a game with sequential technology choices both firms investing dedicated will not be an equilibrium especially when the economic environment is more uncertain the incumbent overinvests in product flexible capacity to force the entrant to choose the dedicated technology then the incumbent is the only firm with the product flexible production technology which results in a high payoff

central bank independence and inflation revisited we re examine the relationship between central bank independence cbi proxied by the central bank governor s turnover rate and an indicator based on central bank laws in place and inflation using a random coefficient model with the hildreth houck estimator for more than 100 countries in the period 1980 to 2005 we conclude that there exists no general significant negative relation between our indicators of central bank independence and inflation central bank independence has a significant effect only in a minority of the countries in our sample

temperature and growth a panel analysis of the united states this paper documents that seasonal temperatures have significant and systematic effects on the u s economy both at the aggregate level and across a wide crosssection of economic sectors this effect is particularly strong for the summer an increase of 1 f in the average summer temperature is associated with a reduction in the annual growth rate of state level output of 0 15 to 0 25 percentage points when these estimates are combined with projected increases in seasonal temperatures it is found that a reduction of u s economic growth by up to one third could occur over the next century

do businessmen make good governors this paper evaluates the economic performance of u s state governors with a business background chief executive officer ceo governors applying a matching method i find first that businesspeople tend to take office in times of economic and fiscal strain second the tenures of ceo governors are associated with a 0 5 percentage points pp higher annual income growth rate a 0 4 pp higher growth rate of the private capital stock and a 0 6 pp lower unemployment rate than are the tenures of non ceo governors state level income inequality is not affected by ceo governors holding office indicating that low income households benefit from the economic upswing

dynamic capacity management with general upgrading this paper studies a capacity management problem with upgrading a firm needs to procure multiple classes of capacities and then allocate the capacities to satisfy multiple classes of customers that arrive over time a general upgrading rule is considered i e unmet demand can be satisfied using multistep upgrade no replenishment is allowed and the firm has to make the allocation decisions without observing future demand we first characterize the structure of the optimal allocation policy which consists of parallel allocation and then sequential rationing specifically the firm first uses capacity to satisfy the same class demand as much as possible then considers possible upgrading decisions in a sequential manner we also propose a heuristic based on certainty equivalence control to solve the problem numerical analysis shows that the heuristic is fast and delivers close to optimal profit for the firm finally we conduct extensive numerical studies to derive insights into the problem it is foun

optimal capacity for substitutable products under operational postponement abstract we consider a monopolist producing two substitutable products with one flexible shared capacity the demand of each product is a linear function of the prices of both products and is subject to an additive shock we study the impact of two key drivers namely the degree of substitution between the products and the level of operational postponement on the optimal capacity and the resulting expected profit we show that the relationship between the optimal capacity and the degree of product substitution is not impacted by the different postponement strategies the firm can utilize or by the different settings forced clearance versus holdback considered in the previous literature on the other hand how capacity is affected by postponement critically depends on how closely substitutable the products are in particular we show that the well known result that operational postponement and capacity are strategic complements in a single product setting van mieghem and dada 1999 no longer holds in our setting because the two substitutable products are now linked through consumer driven substitution which the firm can influence through pricing in particular capacity and operational postponement in the form of quantity postponement can be either strategic substitutes or strategic complements and this depends on both the firm s cost structure and the degree of substitution between the products we also study the impact of forced clearance on the firm s expected profit and find that clearance deteriorates the firm s earnings more when the products it offers are highly differentiated

optimal investment in product flexible manufacturing capacity this paper presents a model and an analysis of the cost flexibility tradeoffs involved in investing in product flexible manufacturing capacity flexible capacity provides a firm with the ability to respond to a wide variety of future demand outcomes but at the expense of the increased cost of acquiring flexible manufacturing capacity as compared with dedicated or nonflexible capacity we formulate the product flexible manufacturing capacity investment decision as a two stage stochastic program in the first stage the firm must make its investment decision in manufacturing capacity before the resolution of uncertainty in product demand in the second stage after demand for products are known the firm implements its production decisions constrained by the first stage investments the main contributions of this paper are threefold first we develop a model of the firm s flexible manufacturing investment decision that conceptually captures some of the key characteristics of this complex decision probl

global facility network design in the presence of competition abstract we study the facility network design problem for a global firm that is a monopolist seller in its domestic market but faces local competition in its foreign market the global firm produces in the face of demand and exchange rate uncertainty but can postpone localization and distribution of the output until after uncertainties are resolved the competitor in the foreign market however enjoys the flexibility of postponing all production activities until after uncertainties are resolved the two firms engage in an ex post cournot competition in the foreign market we consider three potential network configurations for the global firm under a linear demand function we provide the necessary and sufficient condition that one of the three networks is the global firm s optimal choice and explore how the presence of foreign competition affects the sensitivity of the global firm s design to various cost parameters and market uncertainties

urban accounting and welfare why do people live in particular cities we can list many reasons but two are undoubtedly relevant agents can enjoy the city or be more productive there a combination of life amenities and productivity levels determines the size of cities but the positive effects of these characteristics are capped by the costs and frictions arising from congestion depending on city governance and the flexibility of markets these costs and frictions can be more or less important these city characteristics are in turn enhanced and amplified by the presence of urban externalities understanding the different forces that determine city sizes is crucial for answering a broad set of questions what is the relative importance of these forces in determining the size distribution of cities how much would we gain or lose if cities had similar amenities technology levels or frictions how much reallocation would this cause more generally what are the welfare implications of the location of agents across cities in this paper we provide a simple way of decomposing the characteristics that lead to the size distribution of cities into three main components efficiency amenities and excessive frictions we use a simple urban theory to calculate these components and to carry out a wide set of counterfactual exercises that provide answers to the questions we asked above the theory consists of a multi city model with monocentric cities that produce a single good workers decide how much to work and where to live efficiency is modeled as tfp amenities as directly affecting preferences

does a federal country need federal transfers when it has labour mobility sequeira t n and lopes a f does a federal country need federal transfers when it has labour mobility regional studies this work empirically tests optimum currency area theory for members of a given monetary union the united states the united states is recognized as a country where labour mobility between states is high this paper jointly assesses the consequences of having federal transfers and labour mobility in terms of the states cyclical output it is concluded that federal transfers undoubtedly contribute to increase cyclical output however out migration may increase or decrease cyclical output depending on certain conditions as federal transfers proved to be much more important than migration the answer to the question in the paper s title is yes sequeira t n et lopes a f un pays federal a t il besoin des transferts federaux quand il est deja dote de la mobilite du travail regional studies cet article cherche a tester empiriquement la theorie des zones monetaires optimale

bayesian analysis of spatial panel autoregressive models with time varying endogenous spatial weight matrices common factors and random coefficients this article examines spatial panel autoregressive sar models with dynamic time varying endogenous spatial weights matrices common factors and random coefficients an empirical application is on the spillover effects of state medicaid spending endogeneity of spatial weights matrices comes from the correlation of economic distance and the disturbances in the sar equation common factors control for common shocks to all states and random coefficients may capture heterogeneity in responses the bayesian markov chain monte carlo mcmc estimation is developed identification of factors and factor loadings and model selection issues based upon the deviance information criterion dic are explored we find that a state s medicaid related spending is positively and significantly affected by those of its neighbors both welfare motivated move and yardstick competition are possible sources of strategic interactions among state governments welfare motivated move turns out to be more a driving force for th

a note on probability distributions with increasing generalized failure rates distributions with an increasing generalized failure rate igfr have useful applications in pricing and supply chain contracting problems we provide alternative characterizations of the igfr property that lead to simplify verifying whether the igfr condition holds we also relate the limit of the generalized failure rate and the moments of a distribution

flexible production resources and capacity utilization rates a robust optimization perspective abstract this paper presents a novel application of robust optimization ro in the context of optimal choices of product dedicated and flexible capacities in a spatial setting specifically we examine the impact of acquiring flexible production technologies on a firm s overall capacity utilization rates under demand uncertainty uncorrelated negatively and positively correlated demands are considered we implement an efficient ro algorithm which can solve large samples of robust min max problems in a realistic amount of time this paper examines the impact of three critical factors that lead to different capacity utilization and resource flexibility outcomes the degree of solution robustness selected by the decision maker to accommodate uncertain demand realizations the flexible capacity costs relative to dedicated capacity costs and the level of correlation between product demands one of our results show that according to robust solutions the total capacity may not be fully utilized because of the distinction between largest in unit terms and costliest demand realizations the second result shows that increasing the proportion of flexible capacity can increase capacity utilization however our results report less than full utilization even when using flexible capacity only we show that the optimal amount of flexible capacity and its impact on overall capacity utilization rate substantially depends on demand correlation

incentives and commonality in a decentralized multiproduct assembly system in this paper we explore the impact of decentralized decision making on the behavior of multiproduct assembly systems specifically we consider a system where three components two product specific and one common are used to produce two end products to satisfy stochastic customer demands we study the system under both centralized and decentralized decision making in the decentralized system we prove that for any set of wholesale prices there exists a unique pareto optimal equilibrium in the suppliers capacity game we show that the assembler s optimal wholesale prices lie in one of two regions one leads to capacity imbalance and one does not we use these results to derive insights regarding the inefficiencies that decentralization can cause in such systems in particular several of our findings indicate that outsourcing the management of component supplies may inhibit the use of operational hedging approaches for managing uncertainty

the impact of demand aggregation through delayed component allocation in an assemble to order system we consider an assemble to order system in which multiple products are assembled from a common component and a set of product dedicated components component capacities are chosen prior to a finite horizon selling season and the common component is allocated to the products based on observed demands we propose a collection of allocation mechanisms involving varying degrees of demand aggregation ranging from a scheme under which all demands are observed prior to making the allocation decision to allocations made for each arriving demand in this context we explore the impact of the allocation scheme on sales profits and capacity decisions including the degree of capacity imbalance we find that the benefit from increased demand aggregation is closely linked to the degree of capacity imbalance profit gains from delayed allocation tend to be higher in systems in which the optimal capacity portfolio is highly unbalanced when the allocation decision is made after observing all demands we develop insights into what detailed system parameters lead to the largest gains from demand aggregation and also explore the trade offs associated with the choice of an allocation scheme when customers exhibit impatience if the allocation scheme forces them to wait to be served this paper was accepted by ananth iyer operations and supply chain management

the call sinking fund and term to maturity features of corporate bonds an empirical investigation do bond issuing firms attempt to choose the call sinking fund and term to maturity features of bonds to improve shareholder wealth this paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model the model is estimated on a sample of bonds issued between 1982 and 1986 model estimates show that a bond s call sinking fund and term to maturity features are statistically related to the issuing firm s retention ratio ratio of convertible to long term debt two year change in net operating income and whether the firm is listed on the nyse and included in the s p400 these findings support the view that firms financing highquality projects but facing information asymmetries choose shorter term medium term callable bonds with and without the sinking fund feature

price versus production postponement capacity and competition this article presents a comparative analysis of possible postponement strategies in a two stage decision model where firms make three decisions capacity investment production inventory quantity and price typically investments are made while the demand curve is uncertain the strategies differ in the timing of the operational decisions relative to the realization of uncertainty we show how competition uncertainty and the timing of operational decisions influence the strategic investment decision of the firm and its value in contrast to production postponement price postponement makes the investment and production inventory decisions relatively insensitive to uncertainty this suggests that managers can make optimal capacity decisions by deterministic reasoning if they have some price flexibility under price postponement additional postponement of production has relatively small incremental value therefore it may be worthwhile to consider flexible ex post pricing before production postponement reengineering while more postponement increases firm value it is counterintuitive that this also makes the optimal capacity decision more sensitive to uncertainty we highlight the different impact of more timely information which leads to higher investment and inventories and of reduced demand uncertainty which decreases investment and inventories our analysis suggests appropriateness conditions for simple make to stock and make to order strategies we also present technical sufficiency and uniqueness conditions under price postponement these results extend to oligopolistic and perfect competition for which pure equilibria are derived interestingly the relative value of operational postponement techniques seems to increase as the industry becomes more competitive

duration for bonds with default risk abstract does approximating duration estimates by ignoring default risk lead to error in the two major duration applications measuring interest rate price elasticity and immunization we derive a general expression for duration in the presence of default risk based on jonkhart s term structure model on the term structure of interest rates and the risk of default journal of banking and finance 3 253 262 1979 extended to encompass risk aversion the model includes terms for default probabilities and default payoffs in each period as well as for a delay between the occurrence of default and the final default payoff our main conclusion is that practical duration applications involving bonds with default risk must employ duration measures adjusted for default risk

flexible service capacity optimal investment and the impact of demand correlation we consider a firm that provides multiple services using both specialized and flexible capacity the problem is formulated as a two stage single period stochastic program the firm invests in capacity before the actual demand is known and optimally assigns capacity to customers when demand is realized sample applications include a car rental company s use of mid sized cars to satisfy unexpectedly high demand for compact cars and an airline s use of business class seats to satisfy economy class demand we obtain an analytical solution for a particular case when services may be upgraded by one class the simple form of the solution allows us to compare the optimal capacities explicitly with a solution that does not anticipate flexibility given that demand follows a multivariate normal distribution we analytically characterize the effects of increasing demand correlation on the optimal solution for the case with two customer classes the effects of demand correlation are intuitive increasing correlation induces a shift from flexible to dedicated capacity when there are three or more classes there are also adjustments to the resources not directly affected by the correlation change as correlation rises these changes follow an alternating pattern for example if the optimal capacity of one resource rises then the optimal capacity of the adjacent resource falls these results make precise conjectures based on numerical experiments that have existed in the literature for some time

population economic growth and regional environmental inefficiency evidence from u s states we apply a conditional directional distance function allowing multiple exogenous factors to measure environmental performance we evaluate the air pollution performance levels of u s states for the years 1998 and 2008 states environmental inefficiency is determined by population size and gdp per capita gdppc the overall results reveal that there is much variation in environmental inefficiencies among the u s states a second stage nonparametric analysis indicates a nonlinear relationship between states population size gdppc levels and states environmental inefficiency levels our results indicate that environmental inefficiency on the whole decreases with increased population and income per capita but there are limits to this improvement and at high income and population levels the tendency may reverse

optimal ordering and pricing strategies in the presence of a b2b spot market abstract in the current paper we examine the effect of a b2b spot market on the strategic behavior and the performance of a reseller who continues to use the traditional channel while participating in a b2b spot market we analyze the case in which a risk neutral reseller faces an additive or multiplicative demand function and identify sufficient conditions under which the optimal order quantity and retail price exist and are unique we then analytically examine the case in which a risk averse reseller participates in a fully liquid spot market we also study numerically how varying liquidity spot price volatility demand variability and correlation coefficient affect a firm s strategies and performance we find that demand variability significantly affects both pricing and ordering strategies whereas the spot price volatility has less influence on pricing decisions our results also show that for a risk averse reseller to charge a lower retail price when the spot market liquidity increases is desirable we further show that a b2b spot market cannot always improve a reseller s utility these findings shed light on how resellers can adjust their procurement and pricing strategies to align with the new business environment created by the emergence of b2b spot markets as well as have obvious implications for the development of a b2b spot market

real exchange rates and productivity evidence from asia this paper examines a productivity based explanation of the long run real exchange rate movements of six asian economies using industry level data we construct total factor productivities tfps for the tradable and nontradable sectors we find that a within each country the relative price of nontradable goods is cointegrated with the sectoral tfp differential and b the real exchange rates are cointegrated with the home and foreign sectoral tfp differentials using the predicted real exchange rate as a measure of the long run equilibrium we find that most asian economies real exchange rates are overvalued before the asian financial crisis

the value of flexibility in make to order systems the effect of demand correlation we consider a manufacturer of mass customized modular products who orders components under demand uncertainty and sets prices produces to order and trades excess components in a secondary market after this uncertainty is resolved the sequence of events reflects in a parsimonious fashion the considerable reduction in demand uncertainty between the procurement stage and the selling season typical of industries with long supply lead times and short product life cycles we prove that in contrast to conventional wisdom the value of production flexibility and expected profit increase with demand correlation if and only if commonality between the corresponding products does not exceed a threshold we also prove that the value of flexibility and expected profit may each increase or decrease with demand variability depending on demand correlations and component commonalities across the entire product line finally we prove that when demand shocks are independent the optimal product prices are positively correlated if and only if the degree of commonality between the corresponding products exceeds a threshold

trade in polarized america the border effect between red states and blue states political and cultural polarization in the united states is widely discussed but does it relate to any economic disconnection among states we estimate the border effect between red and blue states using the gravity equation with a nonlinear generalized method of moments estimator to simultaneously overcome the problems associated with endogeneity cross state price differences and zero trade flow the border effect is robustly confirmed for the 2000s while not so robustly detected for the 1990s notably in 2007 the border reduces trade between red and blue states to approximately 75 of the trade within each set of states this estimated border effect is much smaller than the united states canada national border effect estimated by anderson and van wincoop 2003 and by feenstra 2002 yet is comparable to the border effect that nitsch and wolf 2009 find for the former west and east germanies approximately loyears after reunification while the border effect in germany after reunification is decreasing the border effect between the red and blue states is emerging we also find the border effect is more significant for consumption rather than intermediate goods the border effect is an important indicator for a potential dismantling of the economic connectivity in the united states jel d72 f10 fi5 r1 i introduction recent u s presidential elections have raised concern about polarization in u s politics and culture namely the united states is divided into two nations the red states we call it the red nation preserving the term state for an individual state and the blue states the blue nation in the red nation culturally and religiously conservative republicans are dominant while in the blue nation liberal democrats are the majority so far the focus of the discussion is the extent of the polarization abramowitz and saunders 2008 fiorina et al 2008 its determinants gelman et al 2010 and its implications on federal policy making glaeser et al 2005 mellow and trubowitz 2005 economic implications have not been largely discussed however the polarization may suggest economic divisions because it is a sign of geographic sorting of people and their preferences this article provides evidence that economic disconnectivity between the red and blue nations emerged in the 2000s we explore 1 whether there is a border effect on interstate trade 2 if the effect exists how large it is and 3 what types of goods are most affected in the context of existing literature and recent u s political and cultural events we then provide possible explanations for our findings this study uses a gravity equation of international trade to examine the effect of the fictional national border between the red and blue nations the methodology was originally applied by mccallum 1995 to estimate the degree of impact of the national border on trade between the united states and canada he finds that intercountry trade is less than 5 of the intracountry trade of canada controlling for other factors following mccallum s 1995 work several studies have proposed methodological improvements we apply an updated estimation method nonlinear generalized method of moments gmm estimator of a gravity equation to examine the border effect between the red and blue nations our analysis finds a statistically and economically significant border effect between the red and blue nations especially in years 2002 and 2007 we examine the border effect in 1993 1997 2002 and 2007 the years in which trade flow data are available from the federal commodity flow survey cfs the border effect is not robustly found in 1993 and 1997 however it is robustly detected in 2002 and 2007 even with additional controls or alternative specifications at the industry level analysis we find that the border effect is significant for consumption goods such as food tobacco and printed products but not for intermediate products i

capacity optimization under uncertainty the impact of operational time lags time lags in switching operational modes are typical in the manufacturing and power sectors but are not treated in most real options models in this paper we consider a firm that has the opportunity to suspend and to resume production infinitely many times subject to a time lag after each startup decision we contribute to the literature by allowing the firm to determine its level of installed capacity in conjunction with its optimal investment timing we find that an increase in the length of the time lag results in an increase in the optimal capacity level capacity optimization also interacts with the length of the time lag to affect investment timing and the triggers to suspend and resume production thereby weakening the result about hysteresis from a standard real options model under the assumption of a fixed level of capacity a longer lag speeds up the decision to resume operations due to a positive upside to the revenue but delays the suspension of operations by contrast with capacity optimization a longer time lag results in a larger capacity choice which can indirectly delay the investment decision and the timing to resume operations this indirect effect dominates when the level of market uncertainty is low and the time lag is initially small

pricing and operational recourse in coproduction systems coproduction systems in which multiple products are produced simultaneously in a single production run are prevalent in many industries such systems typically produce a random quantity of vertically differentiated products this product hierarchy enables the firm to fill demand for a lower quality product by converting a higher quality product in addition to the challenges presented by random yields and multiple products coproduction systems often serve multiple customer classes that differ in their product valuations furthermore the sizes of these classes are uncertain employing a utility maximizing customer model we investigate the production pricing downconversion and allocation decisions in a two class stochastic demand stochastic yield coproduction system for the single class case we establish that downconversion will not occur if prices are set optimally in contrast we show that downconversion can be optimal in the two class case even if prices are set optimally we consider the benefit of postponing certain operational decisions e g the pricing or allocation rule decisions until after uncertainties are resolved we use the term recourse to denote actions taken after uncertainties have been resolved we find that recourse pricing benefits the firm much more than either downconversion or recourse allocation do implying that recourse demand management is more valuable than recourse supply management special cases of our model include the single class and two class random yield newsvendor models

technology investment under flexible capacity strategy with demand uncertainty abstract this paper investigates technology investment under flexible capacity strategy with demand uncertainty technology investment enables a firm to reduce its total production cost while flexible capacity strategy aims to reduce a firm s production waste by postponing production until demand is known adopting a general technology investment cost we examine how technology investment cost structure affects a firm s technology investment decisions we derive the conditions under which the firm will benefit from technology investment we show that the firm can increase its expected profit through technology investment only when the unit technology investment cost that varies inversely with the basic technology level is below a threshold however even though the technology investment cost is zero the benefit from the increase in technology level is limited furthermore we analytically determine the optimal technology levels and establish their relationships under different technology investment cost structures our findings will help firms evaluate various technology investment options and choose the most proper one