an analysis of the impact of negative csr forced labour parameter on the profitability of supply chain contracts abstract this paper provides a mathematical model to analyse the impact of a negative corporate social responsibility csr parameter that for forced labour on supply chain profitability based on coordination contracts four types of supply chain coordination contract are developed and benchmarked against set performance indices employing sensitivity analysis and non linear optimization techniques nash static and stackelberg dynamic models are employed to represent the gameplay between the manufacturer and retailer in a supply chain the key inputs are average demand and forced labour ratios whereas key performance indicators are advertising inventory and pricing costs our results indicate that by reducing the proportion of forced labour for both members of the supply chain the overall profitability increases in a nash static gaming context however the contractual relationships in a stackelberg dynamic situation provide a different picture here if the retailer assumes the leadership role cost sharing contracts increase the profitability for both partners however if the manufacturer assumes the leader the profit sharing contract leads to the highest overall profit furthermore sensitivity analysis confirms that an ideal situation is one in which the forced labour ratio approaches zero where the profitability of the retailer is usually higher than that of the manufacturer previous researchers have used survey based methods to develop proportional or mediating relationships to measure the impact of csr on supply chain profitability this paper addresses the associated gap by providing a game theoretic based non linear mathematical model to assess the direct impact of negative csr on supply chain profitability and benchmarks the performance of different supply chain contracts

loss aversion and rationality in the newsvendor problem under recourse option abstract risk neutral assumption in the newsvendor problem under recourse option predicts the order quantity insensitive to the selling price and risk aversion modeled through common utility functions gives decreasing order quantity with increasing selling price in this paper we consider loss aversion to model the choice preference of the decision maker in the newsvendor problem under recourse option and prove that loss aversion predicts the rational ordering behavior of the newsvendor with respect to the changes in price and cost parameters further we find that loss aversion can significantly improve the performance of utility function based models in predicting the rational behavior we extend the analysis to a supply chain setting and establish coordinating contract between a loss averse retailer facing a newsvendor problem and a risk neutral supplier under recourse option we find that the contract parameter does not depend on the loss aversion hence the same contract can be implemented with retailers with different levels of loss aversion

dusenberry s ratcheting of consumption optimal dynamic consumption and investment given intolerance for any decline in standard of living duesenberry s ratcheting consumption demand is derived as a feature of the optimal dynamic consumption and investment policy given extreme habit formation that prevents consumption from falling over time preferences are in effect non time separable extended real valued von neumann morgenstern preferences consumption increases each time wealth reaches a new maximum risky investment is proportional to the excess of wealth over the perpetuity value of current consumption extensions constrain the net rate of decrease in consumption with a constant other than zero add more consumption goods and constrain on the maximal holding of the risky asset as a proportion of wealth these strategies may be useful for the management of university endowments participatory investment accounts and risky arbitrage funds

foreign exchange market intervention and expectations the yen dollar exchange rate abstract using press reports and official statistics on central bank intervention in conjunction with options market data we find that central bank intervention had no statistically significant systematic impact on the mean or higher moments of the exchange rate during 1993 2000 we also find that japanese authorities appeared to intervene mainly in response to deviations of the exchange rate from some implicit target levels and to a rise in market uncertainty u s monetary authorities intervened only in cooperation with the japanese authorities

reference points in revenue sharing contracts how to design optimal supply chain contracts abstract coordinating supply chains is an important goal for contract designers because it enables the channel members to increase their profits recently many experimental studies have shown that behavioral aspects have to be taken into account when choosing the type of contract and specifying the contract parameters in this paper we analyze behavioral aspects of revenue sharing contracts we extend the classical normative decision model by incorporating reference dependent valuation into the decision model and show how this affects inventory decisions we conduct different lab experiments to test our model as a result human inventory decisions deviate from classical normative predictions and we find evidence for reference dependent valuation of human decision makers we also show how contract designers can use the insights we gained to design better contracts

the intra day impact of communication on euro dollar volatility and jumps abstract in this paper we examine the intra day effects of verbal statements and comments on the fx market uncertainty using two measures continuous volatility and discontinuous jumps focusing on the euro dollar exchange rate we provide empirical evidence of how these two sources of uncertainty matter in measuring the short term reaction of exchange rates to communication events talks significantly trigger large jumps or extreme events for approximately an hour after the news release continuous volatility starts reacting prior to the news intensifies around the release time and stays at high levels for several hours our results suggest that monetary authorities generally tend to communicate with markets on days when uncertainty is relatively severe and higher than normal disentangling the us and euro area statements we also find that abnormal levels of volatility are mostly driven by the communication of the euro area officials rather than us authorities

designing price contracts for boundedly rational customers does the number of blocks matter when designing price contracts one of the major questions confronting managers is how many blocks there should be in the contract we investigate this question in the setting of a manufacturer retailer dyad facing a linear deterministic consumer demand theoretical marketing models predict that the manufacturer s profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase however increasing the number of blocks to three yields no incremental profits we test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer s share of profits surprisingly having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits we show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer s utility we also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple block contract

high frequency analysis of foreign exchange interventions what do we learn abstract the high frequency analysis of foreign exchange dynamics is helpful in order to better identify the impact of central bank interventions evidence robustly shows that interventions do indeed move the exchange rate level in the desired direction interventions increase volatility in the short run as they are regarded as information but they can reduce volatility overall ways of transmission may reach beyond the signalling channel and also include the portfolio balance and a damping channel finally interventions are more successful if they obey certain conditions such as being coordinated among central banks and going with the market and fundamentals

impulse balance in the newsvendor game abstract one striking behavioral phenomenon is the pull to center bias in the newsvendor game facing stochastic demand subjects tend to order quantities between the expected profit maximizing quantity and mean demand we show that the impulse balance equilibrium which is based on a simple ex post rationality principle along with an equilibrium condition predicts the pull to center bias and other more subtle observations in the laboratory newsvendor game

u s intervention assessing the probability of success this paper estimates the unconditional and conditional probabilities that u s interventions successfully smooth short term mark dollar and yen dollar exchange rates the sample period extends from february 1987 to february 1990 assuming a binomial distribution the number of observed successes usually is greater than one would expect to see randomly results from a logit model suggest that coordinated intervention has a higher probability of success than unilateral intervention the probability of success also increases with the dollar amount of an intervention other conditioning variables are not significant the paper presents a reaction function with adjustments for the incidentally truncated nature of intervention data predicted values serve as instruments for intervention in the logit models

the temporal pattern of trading rule returns and exchange rate intervention intervention does not generate technical trading profits abstract this paper characterizes the temporal pattern of trading rule returns and official intervention for australian german swiss and u s data to investigate whether intervention generates technical trading rule profits the data reject the hypothesis that intervention generates inefficiencies from which technical rules profit in particular high frequency data show that abnormally high trading rule returns precede german swiss and u s intervention australian intervention precedes high trading rule returns but trading intervention patterns make it implausible that intervention actually generates those returns rather intervention responds to exchange rate trends from which trading rules have recently profited

an isomorphism between asset pricing models with and without linear habit formation we show an isomorphism between optimal portfolio selection or competitive equilibrium models with utilities incorporating linear habit formation and corresponding models without habit formation the isomorphism can be used to mechanically transform known solutions not involving habit formation to corresponding solutions with habit formation for example the constantinides 1990 and ingersoll 1992 solutions are mechanically obtained from the familiar merton solutions for the additive utility case without recourse to a bellman equation or first order conditions more generally recent solutions to portfolio selection problems with recursive utility and a stochastic investment opportunity set are readily transformed to novel solutions of corresponding problems with utility that combines recursivity with habit formation the methodology also applies in the context of hindy huang kreps 1992 preferences where our isomorphism shows that the solution obtained by hindy and huang 1993 can be mechanically transformed to dybvig s 1995 solution to the optimal consumption investment problem with consumption ratcheting this article presents a general method for solving asset pricing or portfolio selection models involving linear habit formation of the type studied by sundaresan 1989 constantinides 1990 detemple and zapatero 1991 ingersoll 1992 chapman 1998 and others the basic idea we pursue is that linear habit formation can be thought of as a redefinition of what constitutes consumption to include not only the current consumption rate but also a fictitious possibly negative consumption rate derived from past actual consumption by pricing out this fictitious consumption rate correctly the economy with linear habit formation can be mechanically transformed to an equivalent economy without habit formation this analysis simplifies and unifies existing results but also generates novel solutions for example together with the results of schroder and skiadas 1997 1999 our method produces optimal lifetime consumption and portfolio policies with preferences that combine recursive utility with habit formation under a stochastic

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

central bank authorities beliefs about foreign exchange intervention abstract this paper presents the results of a survey of monetary authorities with respect to foreign exchange intervention the survey offers evidence on new issues that would otherwise be difficult to investigate such as response times non foreign exchange factors in intervention and profitability the survey also reveals new evidence on previously studied issues such as channels of effectiveness respondents disagreed with predominant views on intervention and volatility and common arguments against intervention exchange rate regimes explain central bank beliefs about important aspects of intervention including factors that lead to detection of secret interventions and the potential profitability of intervention

coordination via cost and revenue sharing in manufacturer retailer channels abstract the problem of establishing efficiency in a manufacturer retailer channel channel coordination is extensively discussed in the industrial economics the marketing and the operations research literature however studies considering consumer demand to be simultaneously affected by price and non price variables are scarce one subset of models investigates efficient contracts with non linear tariffs but requires mechanisms which are rarely observed in managerial practice the other subset analyses channel efficiency effects of alternative royalty payments but omits to design an efficient contract we contribute to this literature by investigating a contract of royalty payments that is sufficient for channel coordination based on the analysis of the underlying vertical externalities we show that channel coordination requires cost and revenue sharing via a revenue sharing rate and marketing effort participation rates on both manufacturer and retailer level some surprising findings are highlighted there exists a continuum of efficient contracts efficiency requires a retailer s participation of at least 50 in the manufacturer s cost of marketing effort moreover the elimination of double marginalisation is not necessary for channel coordination manufacturer and retailer can choose an efficient contract via bargaining over the wholesale price the main challenge for managers will be to create acceptance of new types of royalty payments based on a trustful manufacturer retailer relationship we also discuss the cases of the apple iphone market launch and of innovative restaurant franchising to further illustrate and underline the relevance of our results

real time effects of central bank interventions in the euro market abstract this paper investigates the real time effects of sterilized foreign exchange intervention using official intraday intervention data provided by the danish central bank our analysis employs a two step weighted least squares estimation procedure we control for macro surprises address the issue of endogeneity and carry out an array of robustness tests only when the direction of intervention is consistent with the monetary policy stance do we find that intervention exerts a significant influence on exchange rate returns

optimal consumption portfolio choices and retirement planning abstract we examine consumption and investment decisions in a life cycle model with habit formation stochastic opportunity set stochastic wages and labor supply flexibility retirement is taken into account by specifying an age at which labor earnings stop but consumption spending continues explicit solutions are obtained for optimal consumption labor supply and the financing portfolio we examine the structure and determinants of the optimal portfolio we also study the effects of the retirement date and of habits on optimal decisions finally we conduct a preliminary analysis to assess the effects of a liquidity constraint on optimal consumption leisure choices

foreign exchange intervention when interest rates are zero does the portfolio balance channel matter after all abstract this paper provides an empirical investigation of transmission channels of central bank foreign exchange intervention when interest rates are zero and traditional monetary policy options are constrained the paper develops empirically testable hypotheses regarding the functioning of the intervention transmission channels under study these hypotheses evolve around whether or not the market is aware or unaware of intervention official daily data on interventions in the jpy usd market during the 1999 to 2004 japanese zero interest rate period facilitate the analysis the results of the analysis are consistent with the suggestion that intervention when interest rates are zero works through the portfolio balance channel

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

contract preferences and performance for the loss averse supplier buyback vs revenue sharing prior theory claims that buyback and revenue sharing contracts achieve equivalent channel coordinating solutions when applied in a dyadic supplier retailer setting this suggests that a supplier should be indifferent between the two contracts however the sequence and magnitude of costs and revenues i e losses and gains vary significantly between the contracts suggesting the supplier s preference of contract type and associated contract parameter values may vary with the level of loss aversion we investigate this phenomenon through two studies the first is a preliminary study investigating whether human suppliers are indeed indifferent between these two contracts using a controlled laboratory experiment with human subjects taking on the role of the supplier having to choose between contracts we find that contract preferences change with the ratio of overage and underage costs for the channel i e the newsvendor critical ratio in particular a buyback contract is preferred for products wit

the intraday effects of central bank intervention on exchange rate spreads abstract we investigate the intraday effects of intra marginal intervention in a horizontal band on the exchange rate spread official intraday data on danish intervention transactions in the erm ii the exchange rate mechanism of the european union facilitates our analysis we show that intervention purchases and sales both exert a significant influence on the exchange rate spread but in opposite directions intervention purchases of the small currency on average narrow the spread while intervention sales of the small currency on average widen the spread this is a novel finding that differs from those of existing studies that find intervention always widens the exchange rate spread and increases market uncertainty

large versus small foreign exchange interventions abstract we use non temporal threshold analysis to investigate the exchange rate effects of large versus small interventions more than two decades of official daily data on intervention in the jpy usd market facilitate our analysis we find no evidence that small interventions exert a discernible influence on the exchange rate while large interventions significantly influence the exchange rate in the theoretically consistent manner we conclude that small interventions may not be considered a determinant of the exchange rate while large interventions constitute an important element in our understanding and modeling of the exchange rate

designing pricing contracts for boundedly rational customers does the framing of the fixed fee matter the format of pricing contracts varies substantially across business contexts a major variable being whether a contract imposes a fixed fee payment this paper examines how the use of the fixed fee in pricing contracts affects market outcomes of a manufacturer retailer channel standard economic theories predict that channel efficiency increases with the introduction of the fixed fee and is invariant to its framing we conduct a laboratory experiment to test these predictions surprisingly the introduction of the fixed fee fails to increase channel efficiency moreover the framing of the fixed fee does make a difference an opaque frame as quantity discounts achieves higher channel efficiency than a salient frame as a two part tariff although these two contractual formats are theoretically equivalent to account for these anomalies we generalize the standard economic model by allowing the retailer s utilities to be reference dependent so that the up front fixed fee payment is perceived as a loss and the subsequent retail profits as a gain we embed this reference dependent utility function in a quantal response equilibrium framework where the retailer is allowed to make decision mistakes due to computational complexity the key prediction of this behavioral model is that channel efficiency decreases with loss aversion for sufficiently nash rational retailers consistent with this prediction the estimated loss aversion coefficient is 1 37 in the two part tariff condition significantly higher than 1 27 in the quantity discount condition at the same time loss aversion dominates contract complexity in explaining the data lastly we conduct a follow up experiment to confirm the central role of loss aversion as a behavioral driver in one condition the retailer becomes less loss averse when we temporally compress the fixed fee payment and the realization of retail profits which supports the loss aversion theory in the other condition the retailer s contract acceptance rate does not decline when we reward the manufacturer a higher cash payment for each experimental point earned which rules out the competing hypothesis that the retailer rejects contract offers due to fairness concerns

optimal consumption and portfolio policies when asset prices follow a diffusion process abstract we consider a consumption portfolio problem in continuous time under uncertainty a martingale technique is employed to characterize optimal consumption portfolio policies when there exist nonnegativity constraints on consumption and on final wealth we also provide a way to compute and verify optimal policies our verification theorem for optimal policies involves a linear partial differential equation unlike the nonlinear partial differential equation of dynamic programming the relationship between our approach and dynamic programming is discussed we demonstrate our technique by explicitly computing optimal policies in a series of examples in particular we solve the optimal consumption portfolio problem for hyperbolic absolute risk aversion utility functions when the asset prices follow a geometric brownian motion the optimal policies in this case are no longer linear when nonnegativity constraints on consumption and on final wealth are included by these examples one can see that our approach is much easier than the dynamic programming approach

order flow and central bank intervention an empirical analysis of recent bank of japan actions in the foreign exchange market abstract this paper examines the behaviour of end user order flows in the foreign exchange market around periods of intense and large scale intervention activity by the bank of japan first we find very limited evidence that corporate customers are more than usually likely to be net sellers of yen on days when the bank of japan is intervening to sell yen however there is somewhat stronger evidence that financial customers are more likely to be net buyers of yen on the same days second we find very clear evidence that intervention matters in a microstructure analysis the strong contemporaneous correlation between order flows and exchange rate changes essentially disappears on days in which the bank of japan intervenes

contracting in supply chains a laboratory investigation the coordination of supply chains by means of contracting mechanisms has been extensively explored theoretically but not tested empirically we investigate the performance of three commonly studied supply chain contracting mechanisms the wholesale price contract the buyback contract and the revenue sharing contract the simplified setting we consider utilizes a two echelon supply chain in which the retailer faces the newsvendor problem the supplier has no capacity constraints and delivery occurs instantaneously we compare the three mechanisms in a laboratory setting using a novel design that fully controls for strategic interactions between the retailer and the supplier results indicate that although the buyback and revenue sharing contracts improve supply chain efficiency relative to the wholesale price contract the improvement is smaller than the theory predicts we also find that although the buyback and revenue sharing contracts are mathematically equivalent they do not generally result in equivalent supply chain performance

non addictive habits optimal consumption portfolio policies abstract we formulate a model of preferences with non addictive habits where consumption is required to be non negative at all times but can fall below a standard of living index that aggregates past consumption we study the consumption portfolio problem taking account of the non negativity constraint on consumption and provide a constructive proof for the existence of an optimal policy on a finite time horizon 0 t we show that the consumption constraint binds up to an endogenous stopping time 0 t after which it remains slack until t a decomposition of constrained consumption involving an asian average strike capped call option is demonstrated

oral interventions versus actual interventions in fx markets an event study approach the article assesses whether exchange rate communication or oral intervention has been an effective policy tool for monetary authorities to influence exchange rates it employs an event study methodology that identifies intervention clusters or events for the euro dollar and the dollar yen exchange rates the article finds that both oral intervention events and actual intervention events have been highly successful over the short to medium run the article shows that the success of intervention events is related to market conditions and to the coordination among policy makers it also finds that the success of communication and actual interventions is largely unrelated to monetary policy thus suggesting that interventions primarily function through a coordination channel

technical analysis and central bank intervention abstract this paper extends genetic programming techniques to show that us foreign exchange intervention information improves technical trading rules profitability for two of four exchange rates over part of the out of sample period rules trade contrary to intervention and are unusually profitable on days prior to intervention indicating that intervention is intended to halt predictable trends intervention seems to be more successful in checking such trends in the out of sample 1981 98 period than in the in sample 1975 80 period any improvement in performance results from more precise estimation of the relationship between current and past exchange rates rather than from information about contemporaneous intervention

optimal consumption and portfolio rules with intertemporally dependent utility of consumption abstract in the usual consumption portfolio problem lifetime utility is assumed to be time additive this assumption has been criticized for failing to capture important intertemporal dependencies in utility such as intertemporal risk aversion and habit formation this paper studies the consumption portfolio problem for a class of intertemporally dependent utility functions

consumption and portfolio choice under internal multiplicative habit formation this paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit we obtain closed form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint this enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock bond investments we also show that in a setting that combines habit formation with epstein zin utility consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease

fed intervention dollar appreciation and systematic risk abstract in a four factor asset pricing model estimated on daily data fed intervention significantly affects betas of surprises in the market return expected inflation rate yield curve and corporate bond risk premium fed foreign currency sales cause economically and statistically significant increases in the systematic risk premium in appreciation and thus in the dollar s expected appreciation rate the direction the fed desires and consistent with the signaling but not the portfolio balance channel intervention s effects on actual appreciation are less reliable they depend on unpredictable risk factor realizations even successful intervention to strengthen the dollar may be costly by increasing the dollar s systematic risk intervention reduces the attractiveness of u s relative to foreign investments further uncertainty about future fed interventions may induce resource misallocation ceteris paribus investors find it harder to estimate risk adjusted discount rates and forecast the home currency value of cash flows

statistical testing of bounded rationality with applications to the newsvendor model abstract in this paper we define bounded rationality in terms of probabilistic cost efficiency this establishes a framework where bounded rationality can be examined rigorously by statistical methods we apply this theory to data from laboratory experiments on the newsvendor model we enter into a theoretical discussion of the classical pull to center effect and explain why underorders are typically larger than overorders

reference dependence in multilocation newsvendor models a structural analysis we propose a behavioral theory to predict actual ordering behavior in multilocation inventory systems the theory rests on a well known stylized fact of human behavior people s preferences are reference dependent we incorporate reference dependence into the newsvendor framework by assuming that there are psychological costs of leftovers and stockouts we also hypothesize that the psychological aversion to leftovers is greater than the disutility for stockouts we then experimentally test the proposed theory in both the centralized and decentralized inventory structures using subjects motivated by substantial financial incentives consistent with the proposed theory actual orders exhibit the so called pull to center bias and the degree of bias is greater in the high profit margin than in the low profit margin condition these systematic biases are shown to eliminate the risk pooling benefit when the demands across store locations are strongly correlated because the proposed model nests the standard inventory and ex post inventory error minimization theories as special cases one can systematically evaluate the predictive power of each alternative using the generalized likelihood principle we structurally estimate all three theories using the experimental data and the estimation results strongly suggest that the proposed behavioral theory captures actual orders and profits better we also conduct two experiments to validate the behavioral model by manipulating the relative salience of the psychological costs of leftovers versus that of stockouts to alleviate the pull to center bias

does relative risk aversion vary with wealth evidence from households portfolio choice data we analyze whether relative risk aversion varies with wealth we first derive theoretical predictions on how risky shares respond to wealth fluctuations in a portfolio choice model with both external habits and time varying labor income our analytical results indicate that 1 for each household there are two channels through which the risky share responds to wealth fluctuations the habit channel and the income channel 2 across households there are heterogeneous responses through the habit channel those who experience large negative income shocks reduce their share of risky assets and 3 two potential mis identification problems arise when both the heterogeneity in responses through the habit channel and the income channel are ignored we then test the theoretical predictions with data from the panel study of income dynamics contrary to the existing literature our empirical results show evidence of relative risk aversion varying with wealth over time after correcting those two mis identification problems

evaluating foreign exchange market intervention self selection counterfactuals and average treatment effects abstract estimating the effect of official foreign exchange market intervention is complicated by the fact that intervention at any point entails a self selection choice made by the authorities and that no counterfactual is observed to address these issues we estimate the counterfactual exchange rate movement in the absence of intervention by introducing the method of propensity score matching to estimate the average treatment effect ate of intervention to derive the propensity scores we estimate central bank intervention reaction functions we estimate the ate for daily official intervention in japan over the january 1999 march 2004 period this sample encompasses a remarkable variation in intervention frequencies as well as unprecedented frequent intervention towards the latter part of the period we find that only sporadic and relatively infrequent intervention is effective

decision bias in the newsvendor problem with a known demand distribution experimental evidence in the newsvendor problem a decision maker orders inventory before a one period selling season with stochastic demand if too much is ordered stock is left over at the end of the period whereas if too little is ordered sales are lost the expected profit maximizing order quantity is well known but little is known about how managers actually make these decisions we describe two experiments that investigate newsvendor decisions across different profit conditions results from these studies demonstrate that choices systematically deviate from those that maximize expected profit subjects order too few of high profit products and too many of low profit products these results are not consistent with risk aversion risk seeking preferences prospect theory preferences waste aversion stockout aversion or the consequences of underestimating opportunity costs two explanations are consistent with the data one subjects behave as if their utility function incorporates a preference to reduce ex post inventory error the absolute difference between the chosen quantity and realized demand two subjects suffer from the anchoring and insufficient adjustment bias feedback and training did not mitigate inventory order errors we suggest techniques to improve decision making

exchange rate management in emerging markets intervention via an electronic limit order book this paper describes and analyzes the implementation of a crawling exchange rate band on an electronic trading platform the placement of limit orders at the central bank s target rate serves as a credible policy statement that may coordinate beliefs of market participants we find for our sample that intervention increases exchange rate volatility and spread for the next minutes but that intervention days show a lower degree of volatility and spread than non intervention days we also show for intraday data that the price impact of interbank order flow is smaller on intervention days than on non intervention days these stabilizing effects however rely on the conditions of large currency reserves and the existence of capital controls an electronic market seems to support this goal

when do central bank interventions influence intra daily and longer term exchange rate movements this paper examines dollar interventions by the g3 since 1989 and the reasons that trader reactions to these interventions might differ over time and across central banks market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders and how this process in turn might influence exchange rates using intra daily and daily exchange rate and intervention data the paper analyzes the influence of interventions on exchange rate volatility finding evidence of both within day and daily impact effects but little evidence that interventions influence longer term volatility

manufacturer s revenue sharing contract and retail competition this paper investigates a revenue sharing contract for coordinating a supply chain comprising one manufacturer and two competing retailers the manufacturer as a stackelberg leader offers a revenue sharing contract to two competing retailers who face stochastic demand before the selling season under the offered contract terms the competing retailers are to determine the quantities to be ordered from the manufacturer prior to the season and the retail price at which to sell the items during the season the process of pricing and ordering is expected to result in an equilibrium as in the bayesian nash game on the basis of anticipated responses and actions of the retailers the manufacturer designs the revenue sharing contract adopting the classic newsvendor problem model framework and using numerical methods the study finds that the provision of revenue sharing in the contract can obtain better performance than a price only contract however the benefits earned under the revenue sharing contract by different supply chain partners differ because of the impact of demand variability and price sensitivity factors the paper also analyses the impact of demand variability on decisions about optimal retail price order quantity and profit sharing between the manufacturer and the retailers lastly it investigates how the competition between retailers factor influences the decision making of supply chain members in response to uncertain demand and profit variability

do sales of foreign exchange reserves lead to currency appreciation we employ novel time stamped reserve sales data provided by the czech national bank cnb to carry out a time series analysis of the exchange rate implications of czech reserve sales aimed at mitigating valuation losses on euro denominated assets the sales were explicitly not intended to influence the value of the koruna relative to the euro the period under study includes a well defined regime change in the cnb s approach to reserves sales allowing us to address whether the manner in which the sales are carried out matters for their influence on the relative value of the domestic currency we find little evidence that reserve sales influence the exchange rate when sales are carried out on a discretionary and relatively infrequent basis however when the sales are carried out daily we find a statistically and economically significant appreciation of the domestic currency follows