repudiation risk and restitution costs toward understanding premiums on insured deposits this paper contains a theoretical development of the relationship of cd premiums to both the risks of the cd issuer and the third party government guarantor of those deposits the theoretical development shows that the risk of the guarantor derives from the possibility that the guarantee could be repudiated and or the restitution of the depositor s claim could be costly the empirical analysis of the premiums for insured cds indicates that during the years preceding the ultimate collapse of the fslic the market priced the risk of both the guarantor as well as the firm the guarantor risk pricing was responsive to the insolvency of the guarantor the attempts to recapitalize the guarantor and the efforts to resolve the insolvent thrifts during this eventful time period cd premiums rose to 187 basis points and averaged 79 and 54 basis points copyright 1994 by ohio state university press

functional ingredients and food choice results from a dual mode study employing means end chain analysis and a choice experiment abstract in this paper we present the results of a choice experiment ce conducted to examine how the inclusion of a functional ingredient to increase the quantity and effectiveness of fibre affects consumer attitudes towards bread an novel feature of the design of our ce was that it was informed by a means end chain mec to reveal key attributes to be included in the ce in addition we included the dutch eating behaviour questionnaire debq to collect information on all participants underlying eating behaviours we find that bread type is a major factor in determining choice and that the inclusion of a functional ingredient yielded relatively small measures of value we also find that there are differences in willingness to pay wtp between respondent segments and that segment membership is explained by the debq information finally we find that respondents have a stronger preference for a simple health statement compared to or in addition to the implied benefits that result from consuming a functional food product these findings are important in informing both pricing and promotional messages for a functional bread product

understanding heterogeneous preferences in random utility models a latent class approach a finite mixture approach toconditional logit models is developed in whichlatent classes are used to promoteunderstanding of systematic heterogeneity the model is applied to wilderness recreationin which a branded choice experiment involvingchoice of one park from a demand system wasadministered to a sample of recreationists the basis of membership in the classes orsegments in the sample involved attitudinalmeasures of motivations for taking a trip aswell as their stated preferences overwilderness park attributes the econometricanalysis suggested that four classes of peopleexist in the sample using the model toexamine welfare measures of some hypotheticalpolicy changes identified markedly differentwelfare effects than the standard singlesegment model and provided insight into thedifferential impact of alternative policies

interpreting the great moderation changes in the volatility of economic activity at the macro and micro levels most advanced economies have experienced a striking decline in the volatility of aggregate economic activity since the early 1980s volatility reductions are evident for output and employment at the aggregate level and across most industrial sectors and expenditure categories inflation and inflation volatility have also declined dramatically previous studies offer several potential explanations for this great moderation we review evidence on the great moderation in conjunction with evidence about volatility trends at the micro level we combine the two types of evidence to develop a tentative story for important components of the aggregate volatility decline and its consequences the key ingredients are declines in firm level volatility and aggregate volatility most dramatically in the durable goods sector surprisingly this has occurred without a decline in household consumption volatility and individual earnings uncertainty our explanation for the aggregate volatility decline stresses improved supply chain management particularly in the durable goods sector and less important a shift in production and employment from goods to services we provide evidence that better inventory control made a substantial contribution to declines in firm level and aggregate volatility consistent with this view if we look past the turbulent 1970s and early 1980s much of the moderation reflects a decline in high frequency short term fluctuations while these developments represent efficiency gains they do not imply nor is there evidence for a reduction in economic uncertainty faced by individuals and households

the generalized multinomial logit model accounting for scale and coefficient heterogeneity the mixed or heterogeneous multinomial logit mixl model has become popular in a number of fields especially marketing health economics and industrial organization in most applications of the model the vector of consumer utility weights on product attributes is assumed to have a multivariate normal mvn distribution in the population thus some consumers care more about some attributes than others and the iia property of multinomial logit mnl is avoided i e segments of consumers will tend to switch among the subset of brands that possess their most valued attributes the mixl model is also appealing because it is relatively easy to estimate recently however some researchers have argued that the mvn is a poor choice for modelling taste heterogeneity they argue that much of the heterogeneity in attribute weights is accounted for by a pure scale effect i e across consumers all attribute weights are scaled up or down in tandem this implies that choice behaviour is simply more random for some consumers than others i e holding attribute coefficients fixed the scale of their error term is greater this leads to a scale heterogeneity mnl model s mnl here we develop a generalized multinomial logit model g mnl that nests s mnl and mixl by estimating the s mnl mixl and g mnl models on 10 data sets we provide evidence on their relative performance we find that models that account for scale heterogeneity i e g mnl or s mnl are preferred to mixl by the bayes and consistent akaike information criteria in all 10 data sets accounting for scale heterogeneity enables one to account for extreme consumers who exhibit nearly lexicographic preferences as well as consumers who exhibit very random behaviour in a sense we formalize below

pricing risk adjusted deposit insurance an option based model this paper presents a methodology for arriving at empirical estimates of deposit insurance premiums from market data by using isomorphic relationships betweeen equity and a call option and insurance and a put option the data utilizes the market value of equity to solve for the asset value and its volatility market perceptions of fdic bailout policies are explicitly modeled so as to eliminate the bias in inverted values of assets and their volatility sensitivity analyses are performed to show that rank orderings based on premiums are robust to changes in specification thus facilitating allocation of aggregate premium across banks while economists have long argued in favor of risk adjusted deposit insurance as both more equitable and more efficient than the current system of flatrate premiums various recent developments have further contributed to an increasing dissatisfaction with the current system first both the banking industry and the government seem to be tending to the view that deregulation of the banking industry would be necessary in order to meet more sophisticated future demands on the industry as well as desirable as a policy means of stimulating greater competition among banks moreover a sudden rise in the incidence of bank failures 1 and the vulnerability of the u s banks to the socalled international debt crisis have served to bring to the fore concern about the health of the banking industry in the absence of deposit insurance riskier banks will be able to attract deposits only at higher rates and these higher costs of funding serve as built in market regulated incentives to limit excessive risk taking by banks as introduction of deposit insurance makes deposits equally risk free across banks these incentives disappear and regulation and close supervision of the banking industry must necessarily replace them as deterrents to excessive risk taking thus when insurance is offered at a flat premium regulation is designed to ensure that the risk posed to the insurer both asset and financial risk is appropriately uniform

serial nonparticipation in repeated discrete choice models we consider alternative econometric strategies for addressing serial nonparticipation that is repeated choice of the same alternative or same type of alternative across a series of choice occasions in data typically analyzed within the repeated discrete choice framework single and double hurdle variants of the repeated discrete choice model are developed and applied to choice experiment and multisite seasonal recreation demand data our results suggest that hurdle models can generate significant improvements in statistical fit and qualitatively different policy implications particularly in choice experiment applications where the proper treatment of serial nonparticipation is relatively more ambiguous

federal financial guarantees and the occasional market pricing of default risk evidence from insured deposits abstract this paper develops a two date state preference model which demonstrates that investors valuation of third party guaranteed debt depends on the financial condition of the guarantor as the solvency ratio of the guarantor declines investors demand higher promised rates on the firm s debt securities and price the firm risk variables more sensitively the empirical results are derived from sample data of fslic guaranteed obligations from the late 1980s evidence shows differences in the market s perception of fsllc s insolvency between 1987 and 1988 the market response to a decline in the financial condition of the guarantor affected the value of insured cds raising cd rates in relation to the treasury curve and firm risk pricing of insured deposits emerged

impact of information sharing and lead time on bullwhip effect and on hand inventory abstract this work analyzes a two echelon warehouse retailer serial supply chain to study the impact of information sharing is and lead time on bullwhip effect and on hand inventory the customer demand at the retailer is assumed to be an autoregressive ar 1 process both the echelons use a minimum mean squared error mmse model for forecasting lead time demand ltd and follow an adaptive base stock inventory policy to determine their respective order quantities for the cases of without is and inter as well as intra echelon is expressions for the bullwhip effect and on hand inventory for the warehouse are obtained considering deterministic lead time the results are compared with the previous research work and an easy analysis of the various bullwhip effect expressions under different scenarios is done to understand the impact of is on the bullwhip effect phenomenon it is shown that some part of bullwhip effect will always remain even after sharing both inter as well as intra echelon information further with the help of a numerical example it is shown that the lead time reduction is more beneficial in comparison to the sharing of information in terms of reduction in the bullwhip effect phenomenon

production chains and aggregate output volatility abstract a production chain s aggregate output volatility depends upon a number of factors including the number of firms in a chain the management strategy of the firms the point at which products are differentiated lead times and the persistence of demand shocks the influence of these factors is quantified here with an n firm model of the production chain under pure production to stock pts the firms in the chain respond simultaneously to a demand shock producing a positive covariance across firms that raises aggregate volatility under production to order pto the chain s response to a demand shock is staggered but when demand shocks are persistent there is a catch up effect that raises the volatility of each firm s production above that of a firm that under pts nevertheless pto chains typically exhibit less volatility than pts chains thanks to the covariance effect further simulations demonstrate that the production chain stabilizes as the number of production cycles in an observation period increases

an economic evaluation of the environmental benefits from pesticide reduction abstract previous studies on the environmental impacts of pesticide use have tended to focus either on measuring damages through changes in relative risks to various environmental categories or examining the trade off between pesticide use levels and abatement costs this study uses the physical risk assessment approach combined with contingent valuation survey results on consumers willingness to reduce pesticide risk the reduction in external costs associated with the changes in pesticide use in ontario agriculture between 1983 and 1998 is us 188 per household the environmental benefits are largely due to the reduction in the level of high and moderate risk pesticides

markups aggregation and inventory adjustment in this paper i suggest a unified explanation for two puzzles in the inventory literature first estimates of inventory speeds of adjustment in aggregate data are very small relative to the apparent rapid reaction of stocks to unanticipated variations in sales second estimates of inventory speeds of adjustment in firm level data are significantly higher than in aggregate data the paper develops a multisector model where inventories are held to avoid stockouts and price markups vary along the business cycle the omission of countercyclical markup variations from inventory targets introduces a downward bias in estimates of adjustment speeds obtained from partial adjustment models when the cyclicality of markups differs across sectors this downward bias is shown to be more severe with aggregate rather than firm level data similar results apply not only to inventories but also to labor and prices montercarlo simulations of a calibrated version of the model suggest that these biases are quantitatively significant

measuring the bullwhip effect for supply chains with seasonal demand components abstract a bullwhip measure for a two stage supply chain with an order up to inventory policy is derived for a general stationary sarma p q p q s demand process explicit expressions for several sarma models are obtained to illustrate the key relationship between lead time and seasonal lag it is found that the bullwhip effect can be reduced considerably by shortening the lead time in relation to the seasonal lag value

analysis of compound bullwhip effect causes abstract this research investigates compound causes of the bullwhip effect bwe by considering an inventory system with multiple price sensitive demand streams joint price and demand dynamics are captured by a vector time series process that incorporates the stochastic co movements in price and demand we study two bwe measures one for each demand stream individually and one for the aggregated demand we show that demand parameters including demand autocorrelation cross correlation and price sensitivity serve as root causes of the bwe we prove that the impact of these parameters on the bwe can be additively decomposed conditions are established under which a pair of simultaneous compound causes may attenuate or dampen the bwe when demand streams are aggregated we derive a pooling factor that quantifies the impact of demand aggregation on order stability when positive the pooling factor corresponds to a synergy effect that captures the gain in the stability of the pooled orders conditions for the existence of the synergy effect are obtained for several special cases involving a zero leadtime we also discuss how our analytical findings can be managerially applied to bullwhip mitigation strategies

providing a measure for bullwhip effect in a two product supply chain with exponential smoothing forecasts abstract in this paper a two product and two echelon supply chain is considered in order to quantify the bullwhip effect demands of the products are correlated and are represented by a first order vector autoregressive model retailer uses order up to ordering policy for replenishment of stocks and utilizes exponential smoothing forecast method to predict demand in lead time period according to the mentioned assumptions an equation is derived for bullwhip effect measurement and then a numerical example is presented for a better perception of the bullwhip effect behavior when the parameters change a comparison of the bullwhip effect measure has been done when two main forecasting methods i e exponential smoothing and moving average are used and empirical results are provided at last a cost analysis is conducted based on shortage and holding cost under different bullwhip effect measures

the impact of forecasting methods on the bullwhip effect abstract this paper considers the impact of forecasting methods on the bullwhip effect for a simple replenishment system in which a first order autoregressive process describes the customer demand and an order up to inventory policy characterizes the replenishment decision a bullwhip effect measure is derived for the optimal forecasting procedure that minimizes the mean squared forecasting error for the specified demand process similar measures are obtained for the moving average and exponential smoothing methods the findings indicate that different forecasting methods lead to bullwhip effect measures with distinct properties in relation to lead time and underlying parameters of the demand process moreover a simple rule is established to help managers select a forecasting method that yields the lowest inventory cost

inventory control under temporal demand heteroscedasticity abstract this paper studies an inventory control problem when the variance of demand is time varying and exhibits temporal heteroscedasticity we use a first order autoregressive process to characterize the dynamic changes in the level of demand over time and a garch 1 1 structure to describe the changes in the variance of demand under these demand settings we quantify the effect of a temporal heterogeneous variance on inventory performance for a system controlled via an order up to level policy we show that the effect of temporal heteroscedasticity on the forecasting accuracy can be additively decomposed from the total forecasting error variance the decomposition is used to derive the absolute and relative cost deviations when the temporal heteroscedasticity is ignored the relationship of these cost deviations to demand autocorrelation and replenishment leadtime is investigated computational results show that ignoring temporal heteroscedasticity can increase firm s inventory costs by as much as 30 when demand autocorrelation is highly positive

money and the business cycle with one period nominal contracts a modified version of the nominal contract developed by j a gray 1976 and s fischer 1977 is introduced in a general equilibrium model with money which has been used in the real business cycle literature money is introduced in the model through cash in advance constraint two kinds of contracts are examined namely a nominal wage contract and a nominal price contract the nominal wage contract improves the fit of the model in many respects the nominal price contract increases the output volatility enormously but it has some unrealistic features

inventories stock outs and production smoothing if stock outs are ignored and if demand shocks are additive then optimal behaviour requires that the marginal cost of production mc be equated with the expected marginal revenue of increasing expected sales by one unit emr however with more general demand shocks and still ignoring stock outs the excess of mc over emr has the same sign as the covariance of the slope of the demand curve and the marginal valuation of inventory the equality of emr and mc is also broken by taking account of stock outs even if demand shocks are additive if there is a production lag then taking account of stock outs implies that optimal behaviour will be characterized by production smoothing even if the cost of production is linear two alternative definitions of production smoothing are presented and optimal behaviour in the presence of stock outs displays each type of smoothing it is a well known proposition that a firm producing a storable good under conditions of increasing marginal cost will tend to smooth the time profile of its production relative to the time profile of its sales the incentive to smooth production arises from the fact that the cost function is a convex function of the level of production for a given average level of production average costs can be reduced by reducing the variation in production of course if the cost function is linear in the level of production then this incentive to smooth production disappears however we will demonstrate in this paper that if the possibility of stock outs is explicitly incorporated into the firm s dynamic optimization problem i e if we impose a non negativity constraint on inventories and if there is a lag in production then optimal behaviour can be characterized by production smoothing even if the cost function is linear

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

uncertainty in sales and inventory behaviour in the u s trade sectors this paper investigates uncertainty in sales and inventory behavior for the u s wholesale and retail trade sectors first using a vector error correction model with garch m the authors find that the uncertainty measured by forecast error variance in sales does not affect inventory behavior in both trade sectors second using forecast error variance decomposition and estimated permanent components they observe that the uncertainty may be attributed more to demand shocks than to cost shocks

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

preferences of scotch malt whisky consumers for changes in pesticide use and origin of barley abstract in a case study related to scotch malt whisky production this study analyses consumers perceptions and preferences regarding two aspects that have emerged in the debate on sustainable production and consumption and on environmentally responsible food choice namely i the use of pesticides in agriculture and ii the provenance of food ingredients we carried out a choice experiment to investigate preferences and estimate willingness to pay of scotch malt whisky consumers for pesticide use restrictions and the potential impact on the production of one of its essential ingredients barley using latent class models we find that about half of the respondents are non demanders with respect to both attributes and only a third of the sample population are willing to pay for further pesticide restrictions demand for more environmentally responsible production of scotch malt whisky is therefore limited indicating that in the case of scotch malt whisky consumers are not likely to be key to driving sustainable production with respect to barley provenance being able to claim a 100 scottish product could be a plausible commercial option for some producers to pursue in a competitive market methodologically the scale adjusted latent class model proved to be successful in uncovering preference heterogeneity and its sources in including non demanders in the analysis and in accounting for differences in scale amongst respondents

the stabilizing effect of inventory in supply chains this paper presents a hierarchical model framework for the analysis of the stabilizing effect of inventories in multiechelon manufacturing distribution supply chains this framework is used to compare the variance of demand to the variance of replenishment orders at different echelons of the system e g retailer wholesaler empirical data and experience with management games suggest that in most industries inventory management policies can have a destabilizing effect by increasing the volatility of demand as it passes up through the chain the bullwhip effect our model helps to explain these observations and indicates mechanisms that can promote stabilization the analysis results also define sufficient conditions for the existence of stabilization and relate these conditions to the optimality of myopic control policies

hurdle and latent class approaches to serial non participation in choice models in repeated choice modelling studies it is often the case that individuals always select the status quo option although this pattern may reflect considered choices they may also be the result of alternative decisions about whether to participate in the choice process at all alternative methods of dealing with this behaviour each with associated implications for estimates of economic values are presented in particular we consider the alternative strategies of excluding such individuals from the data using hurdle models to explicitly model this group and propose the use of latent class models to endogenously allow for different preference structures an advantage of the latent class approach is that the form of the non participation need not be defined in advance these approaches are considered using uk choice experiment data on food choices where the attributes include genetic modification of food the latent class approach reveals the presence of two forms of non participation in the data

the linear quadratic inventory model as a micro foundation for keynesian theories of the business cycle abstract aggregate inventory investment is invariably procyclical this suggests that inventories play a destabilizing role in the economy as predicted by early keynesian models of the business cycle however this behavior is believed to be inconsistent with the most prominent micro theory of inventories the linear quadratic model this is not the case the linear quadratic model when placed in a simple macro framework can account for the procyclical behavior of inventory investment even when the only shocks are independent demand shocks inventory targets are independent of sales and individual firms adjust inventories slowly towards their target levels

analysis of the bullwhip effect in a multiproduct setting with interdependent demands the bullwhip effect has been extensively studied primarily based on the analysis of various single product models with a few exceptions we extend the single product analysis to the multiproduct setting of interdependent demand streams with auto correlation and cross product correlation as well as contemporaneous correlation across forecasting errors we find that interdependency between demand streams plays a critical role in determining the existence and magnitude of the bullwhip effect specifically we consider two operating environments a the firm orders product specific materials so that the ordering decision is based on the product level and b the firm orders generic materials so that the order decision is based on the category level we show that even with demand pooling a firm operating at the category level can experience a larger bullwhip effect and a larger order variance under certain conditions that depend on the number of products in the category and the demand dependencies

the production and inventory behavior of the american automobile industry understanding inventory movements is central to an understanding of business cycles this paper presents an empirical study of the behavior of inventories in the automobile industry it finds that inventory behavior is well explained by the assumption of intertemporal optimization with rational expectations the underlying cost structure appears to have substantial costs of changing production as well as substantial costs of being away from target inventory thelatter being a function of current sales given this cost structure whether inventory behavior is stabilizing or destabilizing depends on the characteristics of the demand process in the automobile industry inventory behavior is destabilizing the variance of production is larger than the variance of sales

measure of bullwhip effect in supply chains the case of high order autoregressive demand process abstract bullwhip effect the phenomenon in which variance of demand is amplified when moving upstream has attracted the attention of many researchers for the last few decades although the main sources that cause bullwhip effect have been identified quantifying the bullwhip effect still remains a challenge in the past measuring the bullwhip effect for supply chains with autoregressive demand process has been conducted by some researchers however most past researches focused mainly on the simple ar 1 model in many practical situations autoregressive models with higher order should be employed because they might better represent the demand process up to now very little effort has been spent on this matter therefore this research is conducted to fill this gap by first dealing with ar 2 demand process and investigating the behavior of the developed measure with respect to autoregressive coefficients and order lead time extension to the general ar p demand process is then considered

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

what do inventories tell us about news driven business cycles there is widespread disagreement over the quantitative contribution of news shocks to business cycle fluctuations this paper provides a simple identifying restriction based on inventory dynamics that tightly pins down this contribution structural models predict that finished good inventories should fall when there is an increase in consumption and investment induced by news shocks a structural var with these sign restrictions indicates that news shocks account for at most 20 percent of output volatility since inventories comove positively with consumption and investment in the data shocks that generate negative comovement cannot account for the bulk of fluctuations

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

valuing environmental and health risk in agriculture a choice experiment approach to pesticides in italy abstract the widespread use of pesticides in agriculture shows a complex ramification of multiple negative externalities ranging from food safety related effects to the deterioration of farmland ecosystems recent research has demonstrated that the assessment of the economic implications of such negative processes is fraught with many uncertainties this paper presents the results of an empirical study recently conducted in northern italy aimed at estimating the economic value of reducing the wide ranging impacts of pesticide use by deploying a choice experiment approach the experimental design provides a meaningful tool to assign monetary values to the negative environmental effects associated with agrochemicals use in this connection the paper addresses in particular the reduction of farmland biodiversity groundwater contamination and harm to human health the resulting estimates confirm that on average respondents demonstrate a substantial willingness to pay a premium for agricultural goods in particular foodstuffs produced in environmentally benign ways

model selection for the mixed logit with bayesian estimation in this paper the mixed logit ml using bayesian methods was employed to examine willingness to pay wtp to consume bread produced with reduced levels of pesticides so as to ameliorate environmental quality from data generated by a choice experiment model comparison used the marginal likelihood which is preferable for bayesian model comparison and testing models containing constant and random parameters for a number of distributions were considered along with models in preference space and wtp space as well as those allowing for misreporting we found strong support for the ml estimated in wtp space little support for fixing the price coefficient a common practice advocated and adopted in the environmental economics literature and weak evidence for misreporting

reduction of the value of information sharing as demand becomes strongly auto correlated information sharing has been identified in the academic literature as one of the most important levers to mitigate the bullwhip effect in supply chains a highly cited article on the bullwhip effect has claimed that the percentage inventory reduction resulting from information sharing in a two level supply chain when the downstream demand is autoregressive of order one is an increasing function of the autoregressive parameter of the demand in this paper we show that this is true only for a certain range of the autoregressive parameter and there is a maximum value beyond which the bullwhip ratio at the upstream stage is reduced and the percentage inventory reduction resulting from information sharing decreases towards zero we also show that this maximum value of the autoregressive parameter can be as high as 0 7 which represents a common value that may be encountered in many practical contexts this means that large benefits of information sharing cannot be assumed for those stock keeping units skus with highly positively auto correlated demand instead equally careful analysis is needed for these items as for those skus with less strongly auto correlated demand

the bullwhip effect progress trends and directions the bullwhip effect refers to the phenomenon where order variability increases as the orders move upstream in the supply chain this paper provides a review of the bullwhip literature which adopts empirical experimental and analytical methodologies early econometric evidence of bullwhip is highlighted findings from empirical and experimental research are compared with analytical and simulation results assumptions and approximations for modelling the bullwhip effect in terms of demand forecast delay replenishment policy and coordination strategy are considered we identify recent research trends and future research directions concerned with supply chain structure product type price competition and sustainability

the role of forecasting on bullwhip effect for e scm applications abstract the bullwhip effect represents the information distortion in customer demand between orders to supplier and sales to the buyer demand forecasting is one of the main causes of the bullwhip effect the purpose of this study is to analyze the impact of exponential smoothing forecasts on the bullwhip effect for electronic supply chain management e scm applications a simulation model is developed to experiment the different scenarios of selecting right parameters for the exponential smoothing forecasting technique it is found that longer lead times and poor selection of forecasting model parameters lead to strong bullwhip effect in e scm in contrast increased seasonality helps to reduce the bullwhip effect the most significant managerial implication of this study lies in the need to reduce lead times along the e supply chain to mitigate the bullwhip effect while high seasonality would reduce the forecast accuracy it has a positive influence on the reduction of bullwhip effect e scm managers are therefore strongly suggested to utilize exponential smoothing by selecting lower values for and and a mid value for to keep the bullwhip ratio low while at the same time to increase forecast accuracy

modeling and analysis of cash flow bullwhip in supply chain abstract the bullwhip effect that occurs in supply chain inventory can distort demand forecasts and lead to inefficiencies such as excessive inventory stock outs and backorders in this paper we theorize that inventory bullwhip also leads to cash flow bullwhip cfb specifically this paper focuses on studying cfb by developing mathematical and simulation models to analyze the relationship between inventory and cash flow bullwhip by using cash conversion cycle ccc as a metric the mathematical models for inventory bullwhip are developed for two stage and generic multi stage supply chains and then by extending these inventory models the cfb models are developed for two stage cfb predicted by the proposed mathematical models approximately differ 14 from detailed simulation models we find that increasing variability increases inventory and cash flow bullwhip along with lead time whereas increasing the demand observation period has the opposite effect the average marginal impact of the bullwhip effect on the cfb is approximately 20 additionally the cfb is also an increasing function of an expected value of inventory and a decreasing function of an expected value of demand

the bullwhip effect in supply chain networks this paper analyzes the propagation and amplification of order fluctuations i e the bullwhip effect in supply chain networks operated with linear and time invariant inventory management policies the supply chain network is allowed to include multiple customers e g markets any network structure with or without sharing information the paper characterizes the stream of orders placed by any supplier for any stationary customer demand processes and gives exact formulas for the variance of the orders placed and the amplification of order fluctuations the paper also derives robust analytical conditions based only on inventory management policies to predict the presence of the bullwhip effect for any network structure any inventory replenishment policies and arbitrary customer demand processes numerical examples show that the analytical results accurately quantify the bullwhip effect managerial insights are drawn from the analysis the methodology presented in this paper generalizes those in previous studies for serial supply chains

do protest responses to a contingent valuation question and a choice experiment differ it is suggested that the number of protest responses in stated preference surveys depends inter alia on the valuation method used choice experiments ce are said to generate a lower number of protest responses than contingent valuation cv however no comparison of both methods with respect to protest responses has been conducted to date we used both ce and cv in a survey on forest biodiversity in two german regions protest beliefs were measured for all respondents irrespective of whether they were willing to pay or not the results show no clear pattern of differences between ce and cv regarding protest beliefs and protest responses using an attitude scale based on respondents protest beliefs we see a significant negative effect of this attitude on willingness to pay in both methods however in one of the two study regions the effect is weaker in ce than in cv

the production impact of cash for clunkers implications for stabilization policy during july and august of 2009 americans purchased nearly 700 000 new automobiles or light trucks under the government s cash for clunkers program officially the car allowance rebate system or cars under the terms of the purchase qualified buyers traded in their old vehicles to receive a rebate on the price of a new vehicle the amount of the rebate either 3 500 or 4 500 depended on both the model that was traded in and the model that was acquired the direct cost to taxpayers of subsidizing these purchases was roughly 2 8 billion the program had two primary goals to reduce energy consumption and pollution by inducing consumers to replace their old gas guzzlers with newer fuel efficient models and to serve as a stimulus for the troubled automobile industry and the u s economy as a whole in this article we take a close look at the second objective exploring how the cars program affected sales and more important production in the automobile industry 1 drawing on our findings we then propose an answer to the more difficult question of the program s impact on u s gross domestic product gdp 2 in line with other recent studies our analysis shows that the cars program had only a transitory cumulative effect on sales we estimate an initial impact of about 450 000 additional automobile sales but these were essentially shifted from the periods before and especially after the program we calculate that by january 2010 the cumulative effect of the cars program on auto sales was essentially zero 3 more important for our purposes however is the program s effect on automobile production while most studies of cars have focused on sales we argue that the program s success as a stimulus to the economy hinges on its impact on production production increases are more likely to translate into higher gdp and employment gdp being fundamentally a measure of production sales clearly rose at the outset but given that the industry can simply let inventory stocks absorb the increase in sales higher sales alone do not imply higher gdp or employment 4 overall we find that the program had a very modest and short lived effect on production production was about 200 000 units higher during the program in comparison to the 450 000 increase in sales sales from september 2009 to january 2010 were correspondingly lower than they would have been in the absence of cars which allowed producers to have lower production while still replenishing their inventory stocks thus on a quarterly basis we estimate that the cars program shifted production by around 100 000 units from 2009q4 and 2010q1 to 2009q3 these calculations suggest that the program had a negligible direct effect on gdp shifting less than roughly 2 billion or less than one tenth of 1 of gdp into 2009q3 from the subsequent two quarters this contrasts starkly with a study released by the department of transportation dot in the immediate aftermath of the program which concluded that cars had given a substantial boost to both gdp and employment in the final section of the article we discuss why our conclusions differ from those of the dot study our findings raise broader questions beyond just this particular program about the efficacy of efforts to stimulate short term spending it is clearly a mistake to gauge their impact by just looking at the spending they induce without looking at the supply side it is reasonable to expect that producers will use other margins than production and employment to respond to temporary movements in sales so the only question is quantitative how large is the gap between the sales and production impact we find it to be large in the case of cash for clunkers in what follows we will lay out the economics behind our analysis by examining how rebates and other transitory price changes affect consumer purchases and manufacturers inventory decisions

rational expectations and the smoothing properties of inventories of finished goods abstract this paper formulates and estimates a dynamic rational expectations equilibrium model of inventories of finished goods and employment of labor the view that the primary role of inventories of finished goods is to act as a buffer stock in the face of fluctuating demand is examined both the model and estimation results indicate that this is the case because of differences in the costs involved for firms in changing their inventory stocks and labor force in addition to providing some new evidence on the behavior of inventories of finished goods and employment the paper illustrates a technology for maximum likelihood estimation of structural parameters under the hypothesis of rational expectations

inventories and sticky prices note in a recent contribution to this review alan blinder provides an interesting analysis of the relationship between optimal inventory decisions and the process of price adjustment arguing that inventory permits separation of production and sale decisions and allows the firm greater flexibility in responding to anticipated demand disturbances blinder shows that the responsiveness of relative prices depends critically upon the cost of storage and the temporal structure of the demand shocks few economists would fault the intuitive substance of blinder s basic proposition and the proposition is justified with characteristic precision the analysis however is considerably less general than blinder maintains the formal argument of his paper relies upon a simple model of a monopolist capable of backlogging orders and storing unsold goods as the model is constructed order backlogs assume a role of fundamental importance in any stationary equilibrium this feature of the model vitiates blinder s extension of his result to situations in which order backlogs are prohibited the basic monopoly model developed in sections i and ii of blinder s paper places no restriction upon the sign of inventory negative inventory is interpreted as net unfilled orders while no distinction is drawn between reductions in gross inventory and additions to the order backlog as a result the cost of holding inventory is symmetric around an arbitrary minimum point the only role of inventory is to permit the time paths of production and sales to differ gross inventory allows production to antedate sales while order backlogs generate revenue before production costs are borne under these circumstances if future costs and revenues are discounted it is natural to expect any stationary equilibrium level of net inventory to be negative this can be shown to be true of blinder s model it is useful to distinguish in general between the nonstochastic stationary level of inventory n and the stochastic stationary level n the former is realized when the current expected demand disturbance eo is zero and production equals sales the latter which differs from customary usage represents the level of inventory expected to prevail when adjustment to the current nonzero expected demand disturbance is complete if the demand disturbance is not a random walk so that p 1 in blinder s 5 the two equilibria coincide relatively little attention is devoted to either stationary solution because blinder s main interest is in the optimal current solution level n1 the stochastic stationary level is crucially important however since it represents the goal toward which the current choice must provide an optimal first step to verify that both nand n are negative whenever production is strictly positive note that blinder s necessary condition 7 with the coefficient cl set equal to zero together with the definition of xa as the deviation of the shadow value of inventory q from its nonstochastic stationary value q implies

research on bullwhip effect in energy efficient air conditioning supply chain abstract this paper investigates the energy efficient air conditioning supply chain which is composed of one supplier midea and two retailers i e suning and gome with a view of market share we measure the impact of retail prices variability in the two echelon supply chain on the bullwhip effect suning and gome are assumed to possess the autonomy of choosing prices and separately acquire various market shares according to which the relationship between the two prices is simply quantified the order up to inventory policy and the moving average forecasting method are respectively employed by the two retailers furthermore we cast light on how factors like price market share lead time and autoregressive coefficient affect bullwhip effect the results indicate that it s inadvisable to conduct large fluctuation on price besides demand dates that are more historical may actually reduce the bullwhip effect we also find that the bullwhip effect will be bigger when the competition becomes fiercer and there s a necessity for retailers to take measures to reduce the influence of competitors prices

should all choices count using the cut offs approach to edit responses in a choice experiment should we give equal weight to all responses in a choice experiment previous choice modelling papers have considered the issue of the internal consistency of choices such as the extent to which strictly dominated options are chosen in this paper a different focus is employed namely the extent to which people choose options which violate their stated upper or lower limits for the acceptable levels for individual attributes since hypothetical over statement of wtp has been a focus in stated preference studies we concentrate on violations of stated upper limits of wtp and explore the effects of editing such choices using a variable censoring rule and alternative approaches to re classifying choices the empirical case study is a choice experiment on eco tourists in rwanda our main conclusion is that the suggested approach offers a useful way of imposing consistency on choices and that editing choices in this manner has an appreciable impact on estimated willingness to pay however issues remain with regard to explaining why people apparently violate their stated maximum willingness to pay

inventories inflation dynamics and the new keynesian phillips curve abstract we introduce inventories into an otherwise standard new keynesian model and study the implications for inflation dynamics inventory holdings are motivated as a means to generate sales for demand constrained firms we derive various representations of the new keynesian phillips curve with inventories and show that one of these specifications is observationally equivalent to the standard model with respect to the behavior of inflation when the model s cross equation restrictions are imposed however the driving variable in the new keynesian phillips curve real marginal cost is unobservable and has to be proxied by for instance real unit labor cost an alternative approach is to impute marginal cost by using the model s optimality conditions we show that the stock sales ratio is linked to marginal cost we also estimate these various specifications of the new keynesian phillips curve using gmm we find that the predictive power of the inventory specification at best approaches that of the standard model but does not improve upon it

inventories and the volatility of production a stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales this paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories even with no productivity shocks optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation or if the firm can backlog excess demand the reason is that a demand shock affects both the actual inventory level given unchanged production and the desired level production must replenish the stock and adjust to the new desired level copyright 1987 by american economic association

an empirically simulated investigation of the impact of demand forecasting on the bullwhip effect evidence from u s auto industry this study empirically examines the impacts of three major aspects of demand forecasting on the magnitude of the bullwhip effect three research questions are addressed to investigate the association between 1 forecast accuracy 2 aggregate forecasting and 3 responsive forecasting and the bullwhip effect using forecasted demand generated from popular time series forecasting models and real life demand data the study investigates the relationship between the forecasted results and the consequential bullwhip effect the findings show that the forecasting methods used lead to the variation of the bullwhip effect moreover the lead time reduction and the stable demand forecast are beneficial to reduce the bullwhip effect however our empirical results differ from previous findings in two ways i improving forecast accuracy does not necessarily reduce the bullwhip effect and ii aggregate forecasting does not always reduce the bullwhip effect

the multivariate bullwhip effect abstract a multivariate bullwhip expression for m products with an order up to inventory policy is developed the demand models under consideration are differenced stationary vector time series with a wold representation for which general forecasting formulas are available resulting in a large class of possible models including nonstationary ones examples are provided for common demand models and implemented on sales data it is found that the multivariate approach gives rise to mechanisms for understanding and reducing the bullwhip effect through horizontal information sharing particularly for the nonstationary demand case in the stationary setting a more nuanced approach to bullwhip reduction can be achieved by managing the relationship between cross correlations and lead times a method of determining whether a multivariate or univariate approach generates a lower bullwhip effect is proposed

production smoothing evidence from physical product data we reconsider the paradox that the variance of production often exceeds the variance of shipments a result that casts doubt on the production smoothing model of inventory behavior most studies of production smoothing have analyzed two digit sic dollar value data from commerce department surveys in contrast this paper examines disaggregated physical product data and finds that production is smoother than shipments in about two thirds of the 38 industry or product groupings considered however doubts about the model persist most notably euler equation estimates of the model s cost parameters are usually imprecise and often do not have the signs postulated by production smoothing models

the 1985 ohio thrift crisis the fslic s solvency and rate contagion for retail cds this paper uses both an arima transfer function intervention model and a panel data analysis to examine the effect of the ohio deposit insurance crisis in 1985 on the pricing of six month retail certificates of deposit cds for federally insured ohio banks and savings and loans adjusting for pricing reactions due to changes in market rates we find a significant unanticipated rise in cd rate premiums on the initial event week of the crisis that continued for approximately seven weeks consistent with a contingent insurance guarantee hypothesis rate premiums are found to be risk based from both a regulator s and a bank manager s perspective it is important to understand the nature of depositors reactions to a depository institution crisis recent events including large real estate loan losses for major banks the rhode island deposit insurance crisis and the general accounting office s gao announcement that a large bank failure or a severe recession could jeopardize the solvency of the federal deposit insurance corporation fdic have renewed debate over the potential for a widespread loss of confidence in the banking system in particular concern has been expressed over the potential for instability in retail deposit markets in a deregulated environment see smith 1984 1

loan sales and the cost of bank capital this paper considers a model where banks may improve the returns on loans by monitoring borrowers bank regulation together with competitive deposit and equity financing can give banks an incentive to sell loans but the extent of their loan selling is limited by a moral hazard problem a solution is given for the optimal design of the bank loan buyer contract that alleviates this moral hazard problem an explanation is also given as to why some banks might buy loans and why loan sales volume has recently increased banks practice of making loans and then selling them to other institutions and individuals has grown in popularity an important example in the development of loan selling has been the increase in banks mortgage loans that are insured and pooled under the authority of the government national mortgage association gnma and then sold to secondary market investors recently however there has been a dramatic rise in the volume of other types of loans being sold especially by money center banks portions of commercial loans originated by these larger banks are being sold to smaller banks foreign banks and other financial and nonfinancial institutions in addition banks car loans and credit card receivables have also been pooled and sold to institutions and individuals selling loans that were once considered nonmarketable assets a process that has been termed asset securitization may be signalling the start of a fundamental change in the commercial banking business the leading banks in loan selling operations now view themselves more as originators and distributors of loans rather than as institutions holding loans as assets the potentially large impact of loan sales on the future of commercial banking naturally evokes the question of what incentives exist for banks to sell loans in this paper we show that loan sales allow some banks to finance loans less expensively than by traditional deposit or equity issue because bank funds received via loan sales can avoid costs associated with required reserves and

impacts of forecast inventory policy and lead time on supply chain inventory a numerical study abstract this paper first proposes the use of metaheuristic to combine with exponential smoothing methods in forecasting future demands and in determining the optimal inventory policy values for each node in a supply chain network based on historical demand or order streams without the need of any prior knowledge about the demand distribution or distribution fitting the effects of five demand forecasting methods two inventory policies and three lead times on the total inventory cost of a 3 echelon serial supply chain system are then investigated the effect of sharing the demand information for planning the inventories is also compared with that of no sharing for testing 15 quarterly and 15 monthly time series were taken from the m3 competition and are considered as the multi item demand streams to be fulfilled in the supply chain the results indicate that 1 the damped pegel forecasting method is the best in terms of prediction errors because it outperforms others in three of five measures followed by the simple exponential smoothing that wins one of the remaining two and ties the damped pegel in one 2 the supply chain inventory cost increases with increasing lead time and echelon level of the supply chain when the s s policy is used but not the r q policy 3 the r q inventory policy generally incurs lower supply chain inventory cost than the s s policy 4 sharing demand information reduces inventory cost and the reduction is higher for s s than for r q 5 the best demand forecasting method for minimizing inventory cost varies with the inventory policy used and lead time and 6 the correlation between forecasting errors and inventory costs is either negligible or minimal

protest beliefs in contingent valuation explaining their motivation abstract the definition and treatment of protest responses in contingent valuation cv can have a significant influence on the estimated values of the good in question if these responses are censored in order to understand how protest responses are motivated in a cv about forest biodiversity in germany we used an item battery to identify respondents protest beliefs the items were measured for all respondents irrespective of their willingness to pay wtp in principle then a scale based on these beliefs is taken as a dependent variable of regression analyses in addition to environmental concern we used norms the warm glow of giving and dilemma concern as further explanatory variables the latter focuses on cooperation problems in protecting the environment our results show that protest beliefs are significantly influenced by the explanatory factors furthermore the protest beliefs themselves have a significant effect on the decision to be wtp as well as on the amount of money stated by those who are wtp the censoring of protest responses may therefore be indefensible

on the stability of supply chains this paper examines the stability of decentralized multistage supply chains under arbitrary demand conditions it looks for intrinsic properties of the inventory replenishment policies that hold for all customer demand processes and for policies with desirable properties it is found that the overall conditions experienced by suppliers several stages removed from the final customer e g the variances of the orders they receive and the inventories they keep depend on the policy much more than on the demand process a policy specific but demand independent upper bound for the order variance amplification factor of any decentralized policy is shown to exist and its formula is presented the bound is always tight for the suppliers at the end of a long chain so that a policy exhibits the bullwhip effect if and only if its bound is greater than 1 a simple necessary condition for bullwhip avoidance is also identified in terms of a policy s gain gain is the marginal change in average inventory induced by a policy when there is a small but sustained change in the demand rate it is shown thatall policies with positive gain produce the bullwhip effect if they do not use future order commitments because manufacturers can reduce costs by operating with positive gain this explains the prevalence of the bullwhip effect a family of commitment based policies that can dynamically maintain any desired inventory level for any demand rate e g achieve positive gain without the bullwhip effect is also presented the family includes just in time strategies as a special case simulation results are used as an illustration

demand fluctuation and chaotic behaviour by interaction between customers and suppliers this paper presents an investigation on simulation of interaction between customers and suppliers in a three tier supply chain system in the simulation customers respond to the price discount offer made by the supplier and the supplier makes adjusts the price according to stock held the simulation shows that the behaviour of such interaction exhibits deterministic chaos it is found that the attractors of the model move with the environment and the initial states thus the bifurcating points in such a system are unable to provide a guideline in system design to avoid chaos

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

coordinating lead times and safety stocks under autocorrelated demand we consider a supply chain in which orders and lead times are linked endogenously as opposed to assuming lead times are exogenous this assumption is relevant when a retailer s orders are produced by a supplier with finite capacity and replenished when the order is completed the retailer faces demands that are correlated over time either positively or negatively which may for example be induced by a pricing or promotion policy the auto correlation in demand affects the order stream placed by the retailer onto the supplier and this in turn influences the resulting lead times seen by the retailer since these lead times also determine the retailer s orders and its safety stocks which the retailer must set to cover lead time demand there is a mutual dependency between orders and lead times the inclusion of endogenous lead times and autocorrelated demand represents a better fit with real life situations however it poses some additional methodological issues compared to assuming exogenous lead times or stationary demand processes that are independent over time by means of a markov chain analysis and matrix analytic methods we develop a procedure to determine the distribution of lead times and inventories that takes into account the correlation between orders and lead times our analysis shows that negative autocorrelation in demand although more erratic improves both lead time and inventory performance relative to iid demand positive correlation makes matters worse than iid demand due to the endogeneity of lead times these effects are much more pronounced and substantial error may be incurred if this endogeneity is ignored

a novel time varying bullwhip effect metric an application to promotional sales abstract bullwhip effect is a problem of paramount importance that reduces competitiveness of supply chains around the world a significant effort is being devoted by both practitioners and academics to understand its causes and to reduce its pernicious consequences nevertheless limited research has been carried out to analyse potential metrics to measure it that typically are summarized in the coefficient of variation ratio of different echelons demand this work proposes a new metric based on a time varying extension of the aforementioned bullwhip effect metric by employing recursive estimation algorithms expressed in the state space framework to provide at each single time period a real time bullwhip effect estimate in order to illustrate the results a case study based on a serially linked supply chain of two echelons from the chemical industry is analysed particularly this metric is employed to analyse the effect of promotional campaigns on the bullwhip effect on a real time fashion the results show that effectively the bullwhip effect is not constant along time but interestingly it is reduced during the promotional periods and it is bigger before and after the promotion takes place

the production smoothing model of inventories revisited an error correction specification which nests the linear quadratic production smoothing and stock adjustment models of inventories is estimated on u s seasonally adjusted two digit sic data the restrictions of the general model to the production smoothing specification is accepted for four out of six of the production to stock industries and for total nondurables the estimation results do not suggest any use of inventories to smooth the level of production but there is evidence of smoothing of the rate of change of production for three production to stock industries and for both total nondurables and total durables coefficient estimates may however be biased copyright 1994 by royal economic society

equilibrium adjustment with endogenous information and inventories the paper analyzes the interaction of information acquisition and inventory flexibility with industry adjustment to imperfectly perceived cost and demand disturbances improved information about disturbances reduces the extent to which disturbances are unperceived and dampens the use of inventories reduced inventory flexibility induces firms to devote more resources to acquiring information about disturbances the analysis demonstrates how equilibrium price and output adjustment depend endogenously on the degree of inventory flexibility and other structural parameters influencing the acquisition of information in this paper we analyze how endogenous information acquisition and inventory flexibility influence price and output adjustment in a competitive industry we focus on the potential substitutability of information acquisition for inventory flexibility when disturbances are imperfectly perceived by individual firms the analysis highlights the general issue of how market adjustment depends on structural parameters that influence agents incentives to acquire information there are several reasons why information acquisition may play a role in market adjustment first the rapid development of information technology has enabled firms to gather and process data relevant to production and sales decisions from a greater number of external and internal sources this trend has reduced the costs of forecasting and monitoring factors influencing production and demand conditions for the individual firm relative to those of its competitors as well as for the industry as a whole in particular it has permitted quicker awareness of changing customer demand as well as greater control of the flow of inputs and intermediate goods during the production process this implies that the resources devoted to information acquisition and processing have come to play an important role in firm decisions 2 second improved information about demand and cost conditions may affect the function of inventories inventory adjustment allows a firm s production costs to be smoothed in response to anticipated movements in demand and costs and to be buffered against unanticipated disturbances see ashley and orr 1985 thus

asset returns and economic disasters evidence from the s l crisis abstract this paper shows that depositors lost confidence in fslic during the two years prior to passage of firrea legislation which recapitalized the deposit insurance fund in 1989 during this period promised returns on retail cds reflected the expected loss and return standard deviation on these securities in the absence of government insurance cross sectional analysis is used to estimate both the probability and the conditional price of risk associated with fslic default the results suggest that increased uncertainty about both output and inflation in this disaster scenario drove the price of fslic default risk to extremely high levels the results also indicate that the market for retail deposits is characterized by less than perfect arbitrage across geographical regions

the bullwhip effect in capacitated supply chains with consideration for product life cycle aspects abstract this paper presents an analysis of the bullwhip effect and net stock amplification in a three echelon supply chain considering step changes in the production rates during a product s life cycle demand the analysis is focused around highly complex and engineered products e g automobiles that have relatively long production life cycles and require significant capital investment in manufacturing using a simulation approach we analyze three stages of the product life cycle including low volumes during product introduction peak demand and eventual decline toward the end of the life cycle parts of the simulation model have been adopted by a major north american automotive oem as part of a scenario analysis tool for strategic supply network design and analysis the simulation results show that performance of a system as a whole deteriorates when there is a step change in the life cycle demand while restriction in production capacity does not significantly impact the bullwhip effect it increases the net stock amplification significantly for the supply chain setting under consideration furthermore a number of important managerial insights are presented based on sensitivity analysis of interaction effect of capacity constraints with other supply chain parameters

modeling preference heterogeneity in stated choice data an analysis for public goods generated by agriculture stated choice models based on the random utility framework are becoming increasingly popular in the applied economics literature the need to account for respondents preference heterogeneity in such models has motivated researchers in agricultural environmental health and transport economics to apply random parameter logit and latent class models in most of the published literature these models incorporate heterogeneity in preferences through the systematic component of utility an alternative approach is to investigate heterogeneity through the random component of utility and covariance heterogeneity models are one means of doing this in this article we compare these alternative ways of incorporating preference heterogeneity in stated choice models and evaluate the sensitivity of estimated welfare measures to which approach is selected we find that a latent class approach fits our data best but all the models perform well in terms of out of sample predictions finally we discuss what criteria a researcher can use to decide which approach is most appropriate for a given data set

bullwhip effect measurement and its implications the bullwhip effect or demand information distortion has been a subject of both theoretical and empirical studies in the operations management literature in this paper we develop a simple set of formulas that describe the traditional bullwhip measure as a combined outcome of several important drivers such as finite capacity batch ordering and seasonality our modeling framework is descriptive in nature as it features certain plausible approximations that are commonly employed in practical inventory systems the results are nonetheless compelling and can be used to explain various conflicting observations in previous empirical studies building on the theoretical framework we discuss the managerial implications of the bullwhip measurement we show that the measurement can be completely noninformative about the underlying supply chain cost performance if it is not linked to the operational details such as decision intervals and leadtimes specifically we show that an aggregated measurement over relatively long time periods can mask the operational level bullwhip in addition we show that masking also exists under product or location aggregation in some illustrative cases

measure of bullwhip effect in supply chains with autoregressive demand process abstract in supply chain management one of the most critical problems which require a lot of effort to deal with is how to quantify and alleviate the impact of bullwhip effect the phenomenon in which information on demand is distorted while moving upstream although it is well established that demand forecast lead time order batching shortage gaming and price fluctuation are the main sources that lead to the bullwhip effect the problem of quantifying bullwhip effect still remain unsolved in many situations due to the complex nature of the problem in this research a measure of bullwhip effect will be developed for a simple two stage supply chain that includes only one retailer and one supplier in the environment where the retailer employs base stock policy for their inventory and demand forecast is performed through the first order autoregressive model ar 1 the effect of autoregressive coefficient and lead time on this measure will then be investigated

inventories and sticky prices more on the microfoundations of macroeconomics the role of inventories in making prices sticky is studied by analyzing a dynamic linear quadratic model of a monopoly firm facing stochastic demand but able to store its finished goods in inventory it is shown that in contrast to the usual presumption firms that exhibit the smallest output responses to demand fluctuations may also exhibit the smallest price fluctuations specifically firms which have very flexible inventory storage facilities or are subjected to very transitory demand shocks will rely on inventories as buffers and will change neither production nor price very much on the other hand firms which have very inflexible storage facilities or whose demand shocks are quite permanent will display large swings in both price and output the standard assumption about inventory carrying costs that has been used in the literature that they are linear is shown to imply that production is impervious to fluctuations in demand it is also established that prices may respond more strongly to positive demand shocks than to negative ones if it is impossible to hold negative inventories i e to have unfilled orders the model offers an explanation for stickiness in relative prices however under certain circumstances it may help explain the persistence of inflation this abstract was borrowed from another version of this item

an empirical investigation of dynamic ordering policies adaptive base stock policy is a well known tool for managing inventories in nonstationary demand environments this paper presents empirical tests of this policy using aggregate firm level data first we extend a single item adaptive base stock policy in previous literature to a multi item case second we transform the policy derived for the multi item case to a regression model that relates firm level inventory purchases to firm level sales and changes in sales forecasts we focus on two research questions can the adaptive base stock policy explain cross sectional ordering behaviors under sales growth to the extent that the adaptive base stock policy fails to explain ordering behaviors under sales growth are there frictions that explain such a finding our empirical results demonstrate disparities in ordering behaviors between firms experiencing high and moderate sales growth contrary to theoretical prediction this implies that inventory purchases are a function of not only current sales and changes in sales forecast but also past sales growth as potential explanations for this departure from theoretical prediction we show that both future demand dynamics and inventory holding risks depend on past sales growth in addition we find that firms inventory holding risks may also be affected by purchasing constraints imposed by supply chain contracts our results provide managerial implications for practitioners and inform future theoretical research this paper was accepted by martin lariviere operations management

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

characterization of the bullwhip effect in linear time invariant supply chains some formulae and tests the authors analyze the bullwhip effect in multistage decentralized supply chains operated with linear and time invariant inventory management policies the focus is on robustness the supply chain is modeled as a single input single output control system driven by arbitrary customer demands the authors derive robust analytical conditions to predict the presence of the bullwhip effect and bound its magnitude based only on the way inventories are managed these results hold independently of the customer demand the authors also characterize the stream of orders placed at any stage of the chain when the customer demand process is known and ergodic and give an exact formula for the variance of the orders placed this formula generalizes existing results by broadening the class of inventory replenishment policies and customer demand processes to which it applies the authors also show that the bullwhip effect can be mitigated by introducing commitments for future orders into the ordering policies

a panel data study on spanish firms inventory investment this paper raises several questions about inventory investment of a sample of 172 big nonfinancial spanish companies inventory investment has been usually explained by two alternative theories the production smoothing model and the s s model first we provide a descriptive analysis based on industry level data to show some shortcomings of the first model then we test a flexible accelerator model using firm level data the results seem to show that inventory investment previous period inventories and sales are closely and significantly related this evidence although not conclusive rejects both the pure production smoothing model and the s s model at the same time our results confirm the view of a target inventory level and the plausibility of the so called stock adjustment model so that the optimal inventory holding buffers sales volatility

financing constraints and inventories abstract this paper investigates the impact of financing constraints on firms inventory and cash management in particular it examines the extent to which the presence of such constraints may account for certain empirical regularities these include e g the excess variance of production vis a vis that of sales as well as the counter cyclicality and persistence of the inventory sales ratio we model the intertemporal decision making on production cash retention and dividends of a firm that is exposed to stochastic demand shocks in every period and faces constrained access to external sources of finance it is found that the presence of financing constraints can explain the excess variance of production in a model which otherwise would not deliver this result moreover as long as demand is positively serially correlated they also contribute to the counter cyclicality and persistence of the inventory sales ratio the paper suggests that financing constraints should not be discarded as a factor driving the cyclical behaviour of inventories