calculating order up to levels for products with intermittent demand abstract the croston 1972 forecasting and stock control for intermittent demands operational research quarterly 23 289 303 method is the standard method for forecasting intermittent demand it has been shown to perform well in various studies and is available in most commercial forecasting packages however little attention has been paid to linking the method with inventory control i e using the generated forecasts to calculate the inventory control parameters in this study we consider the most commonly applied order up to policy and show how the forecasts can be used to calculate order up to levels in a numerical study we show that the calculated order up to levels lead to service levels that are close to their targets

producer services comparative advantage and international trade patterns we unite the theories of factor abundance and monopolistic competition to explore the general equilibrium relations between trade in producer services economies of scale and factor markets in our model two final goods are produced using capital labor and a variety of differentiated producer services that are produced under increasing returns to scale we analyze the implications for comparative advantage and trade in goods between two countries that differ in factor endowments and in technology of service provision moreover we use the concept of the integrated world equilibrium to investigate trade in goods and services also when services require foreign direct investments

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

the welfare implications of moral hazard and adverse selection in competitive insurance markets i model a competitive insurance market with both moral hazard and adverse selection and analyze the effect on welfare when both problems are present simultaneously an examination of the interaction between these two problems leads to two hypotheses first the nature of the equilibrium contracts is such that each problem partially offsets the welfare loss associated with the other and second the degree to which this occurs increases as agents become more heterogeneous simulation results overwhelmingly support both hypotheses

trade and direct investment in producer services and the domestic market for expertise foreign producer services can provide substantial benefits for domestic firms we build on earlier monopolistic competition models of intermediate producer services in this paper results show that 1 while foreign services are partial equilibrium substitutes for domestic skilled labour they may be general equilibrium complements 2 service trade can provide crucial missing inputs that reverse comparative advantage in final goods 3 the optimal tax on imported services may be a subsidy and 4 in our dynamic formulation there may be earnings losses for immobile workers along a transition path that suggest potentially important equity consequences of reform jel classification f12 f16 f23 commerce international et investissement direct dans les services de production et le marche interieur de l expertise les services de production en provenance de l etranger peuvent engendrer des avantages substantiels pour les entreprises domestiques dans ce memoire les auteurs construisent sur la base de certains modeles anterieurs de concurrence monopolistique de services de production intermediaires les resultats montrent que 1 alors que les services de l etranger sont des substituts pour le travail domestique specialise en equilibre partiel en equilibre general ils peuvent etre des complements 2 le commerce de services peut fournir des intrants cruciaux qui manquent et ce faisant renverser les avantages comparatifs dans les produits finaux 3 la fiscalite optimale imposee sur les services importes peut etre une subvention et 4 dans la formulation dynamique du modele il peut y avoir perte de revenus pour les travailleurs immobiles le long du sentier de transition ce qui suggere qu il peut y avoir des consequences importantes au plan de l equite associees a certaines reformes

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

adverse selection repeated insurance contracts and announcement strategy in this note we present a strategy which relies on multi period contracts and on a self selection mechanism which induces the insured to announce his true risk in the first period thus eliminating inefficiency due to adverse selection

adapting the knowledge capital model of the multinational enterprise to trade and investment in business services at some conceptual level trade in goods and services are not that much different however the speed at which trade and foreign investment in services is growing along with the fact that the barriers to these activities are quite different from those for trade in goods prompts us to take a more careful look the paper begins with a general discussion about the various policies and technological constraints that impact foreign trade and the establishment of foreign commercial presence in intermediate business services we then discuss which characteristics an accurate modelling approach must capture following that we develop a model that allows for different regimes of trade and or foreign affiliate production in services using markusen s knowledge capital model simulations show that the pattern of service firm headquarters and office locations can differ considerably depending on whether it is trade investment or both that are either liberalised or become technologically feasible our results find that the welfare and factor price consequences are quite similar across the different scenarios

market equilibrium with private knowledge the effect of asymmetric information between buyers and sellers on product quality was first explored by akerlof 1970 in his pathbreaking paper on the market for lemons he showed that if all purchasers have imperfect information on quality then a market for the product may not exist or if it does function it may not be efficient these results have led to a number of papers concerning insurance and labor markets under different assumptions regarding how agents discriminate between products of varying quality see pauly 1974 rothschild and stiglitz 1976 wilson 1977 miyasaki 1977 and spence 1978

multi period insurance contracts this paper examines the form of insurance contracts in the presence of asymmetric information about consumers accident probabilities our goal is to understand the adjustment in contract terms as a function of accident histories in a finite horizon model we also compare these adjustments between alternative market structures our principal findings indicate that history dependent insurance contracts serve a useful sorting role individuals who declare themselves low risks to insurance companies face adverse contracturai terms if they subsequently have many accidents these adjustments are strongest in the case of a single insurance seller but are present in the competitive model as well

evaluation of forecasting error measurements and techniques for intermittent demand abstract this paper is a part and contribution to develop flexible and robust supply chain forecasting systems under changing market demands it suggests new tools and models to evaluate forecasting error measurements the paper especially studies slow moving or intermittent demand when for items the forecasting time periods often have zero demand for the difficult to forecast intermittent demand the croston forecasting technique is mostly regarded as a better choice than single exponential smoothing these two methods croston and single exponential smoothing together with two modifications of the croston method are discussed and evaluated with real intermittent data the apprehended performance of a forecasting technique is dependent of the chosen measurement of forecast errors the main purpose is to examine and evaluate different forecasting error measurements traditional measurements of forecast errors are studied mean absolute deviation mad mean square error mse etc together with new suggested error and bias measurements periods in stock pis and number of shortages nos pis considers the time aspect of the forecast error nos considers the development of cumulated forecast error cfe a complementary measure for descriptive statistics of time series is also suggested mean average change the conclusion through principal components analysis pca is that a single measure of forecast errors does not present the total different dimensions of the errors complementary error measures must be used

on the stock control performance of intermittent demand estimators the purpose of this paper is to assess the empirical stock control performance of intermittent demand estimation procedures the forecasting methods considered are the simple moving average single exponential smoothing croston s method and a new method recently developed by the authors of this paper we first discuss the nature of the empirical demand data set 3000 stock keeping units and we specify the stock control model to be used for experimentation purposes performance measures are then selected to report customer service level and stock volume differences the out of sample empirical comparison results demonstrate the superior stock control performance of the new intermittent demand forecasting method and enable insights to be gained into the empirical utility of the other estimators

greasing the wheels of international commerce how services facilitate firms international sourcing we use unique plant level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad to guide our empirical analysis we develop a monopolistic competition model of the materials sourcing decisions of heterogeneous firms the model generates predictions about how the intensity of international sourcing of materials depends on a firm s productivity and the availability of local services these predictions are supported by the data we find evidence that more productive manufacturing firms tend to have a higher ratio of imported materials to sales in addition we find evidence that services grease the wheels of international commerce a greater availability of services across regions industries and time increases a firm s foreign sourcing of materials relative to sales interestingly this positive impact of local service availability on imports especially applies to stand alone firms that unlike multinationals are less likely to rely on imported or internally provided services

production trade and migration with differentiated skilled workers a model is developed in which the output of one traded sector e g high tech is produced using consultants who supply differentiated skilled services an external economy is shown to exist which in turn implies a the suboptimal supply of skilled specialists b multiple equilibria and c disadvantages for small and or late developing economies although the results indicate a positive role for subsidies the model emphasizes the need to subsidize the use not training of skilled specialists the latter policy subsidizes foreigners through emigration production commerce international et migration dans un contexte ou laforce de travail est qualifieze et differenciee l auteur developpe un modele dans lequel la production dans un secteur ofu les biens sont transiges internationalement haute technologie requiert l usage de consultants qui fournissent des services qualifies et differencies on montre l existence d economies externes qui font que a il y a offre sous optimale d experts qualifies b des equilibres multiples existent et c les petites economies ou celles qui se sont developpees tardivement sont desavantagees bien que les resultats indiquent que les subventions peuvent jouer un role positif le modele suggere qu il faut subventionner l utilisation et non pas la formation de specialistes qualifies cette derniere politique subventionne les etrangers via la migration

can group incentives alleviate moral hazard the role of pro social preferences abstract incentivizing unobservable effort in risky environments such as in insurance credit and labor markets is vital as moral hazard may otherwise cause significant welfare losses including the outright failure of markets ensuring incentive compatibility through state contingent contracts between principal and agent however is undesirable for risk averse agents we provide a theoretical intuition on how pro social preferences between agents in a joint liability group contract can ensure incentive compatibility two independent large scale behavioral experiments framed in an insurance context support the hypotheses derived from our theory in particular effort decreases when making agents payoff less state dependent but this effect is mitigated with joint liability in a group scheme where agents are additionally motivated by pro social concerns activating strategic motives slightly increases effort further particularly in non anonymous groups with high network strength the results support existing evidence on joint liability groups and further suggest that even if peer pressure to ensure effort provision is absent such group policies can improve efficiency when agents are pro social

commercial policy and the domestic carrying trade in this paper the authors examine the economic consequences of existing u s restrictions on trade in domestic water transportation cabotage services they briefly trace the history of u s policy on cabotage the authors also use an applied general equilibrium model of the united states to analyze the effects of the jones act on welfare and on production trade and employment in important upstream and downstream sectors the economic effects of u s maritime policies rank them with u s trade policies like the mfa the automobile and steel quotas of the mid 1980s and agricultural import restraints coauthors are hugh m arce kenneth a reinert and joseph e flynn

incentives in principal agent relationships this article identifies some of the major issues that have been examined in the literature on incentives the article begins by discussing the frictions that lie at the heart of incentive problems next the principal s optimal response to these frictions is explored taking as given the characteristics of the agents with whom the principal interacts in a nonrepeated setting the design of individualized contracts contests and tournaments is analyzed then the principal s task of selecting the best agent is addressed and repeated agency relationships are considered

financial intermediation delegated monitoring and long term relationships abstract this paper considers the consequences of enduring relationships for bank structure and policy in an information based banking model adding a richer time dimension allows repeated lending between the intermediary and borrower this contract lets a bank produce information and enforce compliance more easily than direct monitoring of the borrower s organization this implies an asymmetric banking structure banks enter long term relationships with borrowers but not with depositors next it shows how enduring relationships solve problems with loan participations and security underwriting by commercial banks

price discrimination by a many product firm determining the optimal selling strategy for a multiproduct firm facing consumers with unknown tastes is a difficult task this paper aims to show how almost optimal nonlinear tariffs can often be found when the number of products becomes large

self selection and monitoring in dynamic incentive problems with incomplete contracts a dynamic trading problem is examined in which a monopsonistic employer tries to hire workers whose productivities and reservation wages are private information the employer can only observe an employee s quality indirectly by monitoring a non verifiable measure of on the job performance the employer makes contract offers which employees can accept or reject once a contract has been accepted it is impossible for the employer to exchange messages with individual employees on the unique stationary equilibrium path for the contracting game the employer chooses between two mutually exclusive outcomes in the market outcome the employer offers long term contracts and information is conveyed entirely through self selection and delayed production in the monitoring outcome the employer offers short term contracts and contract renegotiation is conditioned by an employee s past performance a simple characterization theorem is provided which illustrates the often surprising effects of improvements in information in this setting for example an employer who is initially offering short term contracts to exploit performance information may stop monitoring and shift to market screening when the monitoring technology becomes more informative

moral hazard cycles in individual coverage crop insurance this paper examines the moral hazard implications of individual coverage crop insurance contracts individual coverage contracts are informationally superior to standard contracts because the farmer s coverage is proportional to his average historical yield despite this apparent benefit the steady state solution is shown to be characterized by moral hazard cycles where moral hazard is practiced in alternative periods the amplitude of the cycle and thus the variability in planned production is shown to be larger the lower the degree of production uncertainty the fewer the number of years used in the averaging process the higher the coverage threshold and the lower the level of co insurance

optimal multiperiod contracts and the gain from enduring relationships under private information informational asymmetries can play a key role in explaining the existence and nature of multiperiod contracts in an illustrative risk sharing model even relatively short two period contracts can be mutually beneficial if there is private information though one period contracts suffice otherwise further contracts which are pareto optimal relative to the environment and the information structure are defined and partially characterized an example illustrates how otherwise inefficient intertemporal tie ins can be used optimally to mitigate incentive problems the obvious borrowing lending schemes are not private information pareto optimal in these period by period actions are not sufficiently constrained discounting affects the form of the optimal contract but none of these qualitative conclusions

moral hazard and secured lending in an infinitely repeated credit market game we analyze repeated moral hazard with discounting in a competitive credit market with risk neutrality even without learning or risk aversion long term bank borrower relationships are welfare enhancing the main result is that the borrower obtains an infinite sequence of unsecured loans at below spot market cost following the first good project realization this contract produces first best action choices prior to this stage the borrower gets secured loans with above market borrowing cost the optimal contract thus displays a selective memory feature taking only one of two forms at any given point in time depending on prior history we consider an infinitely repeated bank borrower relationship with moral hazard and universal risk neutrality and explore the ramifications of credit contract duration when the two well known benefits of long term contracting learning and improved risk sharing are absent our objectives are twofold the first is to analyze an infinitely repeated game with discounting in a credit market context we thus relate the theory of repeated games to financial intermediation theory particularly to issues of moral hazard and collateral related distortions the second objective is to understand noteworthy stylized facts of credit markets such as durability in credit relationships lower borrowing costs for established borrowers and unsecured loans for established borrowers versus secured loans for newer borrowers while these practices may be partly due to learning we show that learning is not essential to rationalize them even if information decays rapidly and banks learn nothing about borrowers through time these aspects of credit contracting arise in a repeated game context our main results are as follows first despite universal risk neutrality and the absence of learning a durable bank relationship benefits the borrower 2 the intuition is that the long term contracting permitted by a durable relationship enables the bank to efficiently tax and subsidize the borrower through time to reduce the use of costly collateral second the average welfare loss due to moral hazard per period is positive even as the time horizon goes to infinity third the optimal infinite horizon contract has the striking property that following the period

automobile insurance ratemaking in the presence of asymmetrical information automobile insurance is an example of a market where multi period contracts are observed this form of contract can be justified by asymmetrical information between the insurer and the insured insurers use risk classification together with bonus malus systems in this paper we show that the actual methodology for the integration of these two approaches can lead to inconsistencies we develop a statistical model that adequately integrates risk classification and experience rating for this purpose we present poisson and negative binomial models with regression component in order to use all available information in the estimation of accident distribution a bonus malus system which integrates a priori and a posteriori information on an individual basis is proposed and insurance premium tables are derived as a function of time past accidents and the significant variables in the regression statistical results were obtained from a sample of 19 013 drivers

intermittent demand forecasts with neural networks intermittent demand appears when demand events occur only sporadically typically such time series have few observations making intermittent demand forecasting challenging forecast errors can be costly in terms of unmet demand or obsolescent stock intermittent demand forecasting has been addressed using established forecasting methods including simple moving averages exponential smoothing and croston s method with its variants this study proposes a neural network nn methodology to forecast intermittent time series these nns are used to provide dynamic demand rate forecasts which do not assume constant demand rate in the future and can capture interactions between the non zero demand and the inter arrival rate of demand events overcoming the limitations of croston s method in order to mitigate the issue of limited fitting sample which is common in intermittent demand the proposed models use regularised training and median ensembles over multiple training initialisations to produce robust forecasts the nns are evaluated against established benchmarks using both forecasting accuracy and inventory metrics the findings of forecasting and inventory metrics are conflicting while nns achieved poor forecasting accuracy and bias all nn variants achieved higher service levels than the best performing croston s method variant without requiring analogous increases in stock holding volume therefore nns are found to be effective for intermittent demand applications this study provides further arguments and evidence against the use of conventional forecasting accuracy metrics to evaluate forecasting methods for intermittent demand concluding that attention to inventory metrics is desirable

forecasting and stock control a study in a wholesaling context wholesalers add value to the products they deal with by essentially bringing them closer to the end consumers in that respect the effective control of stock levels becomes an important measure of operational performance especially in the context of achieving high customer service levels in this paper we address issues pertinent to forecasting and inventory management in a wholesaling environment and discuss the recommendations proposed in such a context in a case study organization our findings demonstrate the considerable scope that exists for improving current practices and offers insights into possible managerial issues

the folk theorem with imperfect public information the authors study repeated games in which players observe a public outcome that imperfectly signals the actions played they provide conditions guaranteeing that any feasible individually rational payoff vector of the stage game can arise as a perfect equilibrium of the repeated game with sufficiently little discounting the central condition requires that there exist action profiles with the property that for any two players no two deviations one by either player give rise to the same probability distribution over public outcomes the results apply to principal agent partnership oligopoly and mechanism design models and to one shot games with transferable utilities copyright 1994 by the econometric society

pricing municipal debt pricing municipal debt is a process substantially different from the valuation of corporate liabilities municipalities are not seized upon default therefore they might own additional assets that could he made available to retire debt even when the value of pledged revenues is insufficient to do so however if the value of the municipality s additional assets is only observable privately moral hazard can deter payments from these alterna tive revenue sources a second consequence of lack of seizure is that the municipality survives and might return to the capital markets to raise additional funds in the future this opens an opportunity to induce extraordinary payments from the value of the ad ditional assets through multiperiod pricing controls e g by following defaults with poor pricing for subsequent securities issues

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

evidence on the incentive properties of share contracts abstract ever since adam smith share contracts have been condemned for their lack of incentives sharecropping tenants face incentives to undersupply productive inputs since they receive only a fraction of the marginal revenue the empirical literature reports that lands under sharecropping are indeed less productive and employ inputs less intensively than those operated by owners this paper shows that 1 sharecropping and fixed rent tenancy are both associated with low quality lands 2 plots under sharecropping and fixed rent present on average the same unconditional productivity 3 controlling for observed land quality and input use their average productivities are also identical to those of owner operated plots and 4 the input choices satisfy the same profit maximization conditions for all land contracts these results challenge the conventional wisdom connecting sharecropping to incentive distortions they support an alternative view that farmers optimally employ more input resources into

the dual role of demand deposits under asymmetric information when there is initial asymmetric information between lenders and borrowers accepting checkable deposits can give banks information about the quality of future borrowers hence the two main types of bank activities are complementarities nevertheless it is shown that intermediaries who fund themselves by other means and thus do not get the same borrower information as banks can coexist with banks in equilibrium with the possibility of legally binding contingent contracts banks earn zero expected profits in equilibrium in spite of their information advantage relative to other intermediaries if legally binding contingent contracts are infeasible there may exist an implicit contract equilibrium

another look at estimators for intermittent demand abstract in this paper we focus on forecasting for intermittent demand data we propose a new aggregation framework for intermittent demand forecasting that performs aggregation over the demand volumes in contrast to the standard framework that employs temporal over time aggregation to achieve this we construct a transformed time series the inverse intermittent demand series the new algorithm is expected to work best on erratic and lumpy demand as a result of the variance reduction of the non zero demands the improvement in forecasting performance is empirically demonstrated through an extensive evaluation in more than 8000 time series of two well researched spare parts data sets from the automotive and defence sectors furthermore a simulation is performed so as to provide a stock control evaluation the proposed framework could find popularity among practitioners given its suitability when dealing with clump sizes as such it could be used in conjunction with existing popular forecasting methods for intermittent demand as an exception handling mechanism when certain types of demand are observed

intermittent demand linking forecasting to inventory obsolescence the standard method to forecast intermittent demand is that by croston this method is available in erp type solutions such as sap and specialised forecasting software packages e g forecast pro and often applied in practice it uses exponential smoothing to separately update the estimated demand size and demand interval whenever a positive demand occurs and their ratio provides the forecast of demand per period the croston method has two important disadvantages first and foremost not updating after many periods with zero demand renders the method unsuitable for dealing with obsolescence issues second the method is positively biased and this is true for all points in time i e considering the forecasts made at an arbitrary time period and issue points only i e considering the forecasts following a positive demand occurrence only the second issue has been addressed in the literature by the proposal of an estimator syntetos boylan approximation sba that is approximately unbiased in this paper we propose a new method that overcomes both these shortcomings while not adding complexity different from the croston method the new method is unbiased for all points in time and it updates the demand probability instead of the demand interval doing so in every period the comparative merits of the new estimator are assessed by means of an extensive simulation experiment the results indicate its superior performance and enable insights to be gained into the linkage between demand forecasting and obsolescence

bank market power and lending during the global financial crisis abstract this research examines how the global financial crisis gfc affected banks supply of credit not only in a direct way but also indirectly through changes in bank market power we use a sample of 735 banks from 17 countries during the 2003 2012 period we find that the direct negative impact of the gfc on banks supply of loans is counteracted by an indirect effect through the increased level of bank market power in the years after the onset of the crisis this result is particularly relevant in countries with less stringent restrictions on bank activities and less supervisory power

adapting wright s modification of holt s method to forecasting intermittent demand abstract the challenge of accurately forecasting demand for spare parts is due to the intermittent nature of their demand this study compares a recent modification of croston s method and a method based on holt s double exponential smoothing taking the firm s competitive priorities into consideration wright s modification of holt s method is presented as a viable alternative when forecasting demand for spares especially when trend is present results indicate that firms focusing on minimizing inventory levels as a priority should consider forecasting using the modified croston s method if their priority is high customer service then the modified holt s method is superior

moral hazard insurance claims and repeated insurance contracts the paper develops a simple model of repeated automobile insurance contracts providing a framework for analyzing changes in aggregate insurance data in periods of changes that affect driver incentives experience rating of premiums gives drivers an incentive to exert effort to avoid accidents ex ante moral hazard and an incentive to hide accidents ex post moral hazard the empirical analysis using data from the competitive insurance markets in ontario and alberta over a period of major legislative changes in ontario suggests that much of the recent decline in accidents in ontario was due to an increased incentive to hide accidents jel classification d 12 d82 hasard moral reclamations d assurance et contrats d assurance renouveles le texte developpe un modele simple de contrats d assurance automobile renouveles fournissant un cadre d analyse des donnees d assurance agregees dans des periodes de changement qui affectent les incitations des chauffeurs un regime de primes cotees selon l experience donne aux chauffeurs une incitation a faire des efforts pour eviter les accidents hasard moral ex ante et une incitation a cacher qu il y a eu accident hasard moral ex post l analyse empirique utilisant les donnees recueillies dans les marches d assurance con currentiels de l ontario et de l alberta pour une periode au cours de laquelle il y a eu des changements legislatifs majeurs en ontario suggere qu une bonne partie du declin des accidents enregistre en ontario a ete attribuable a une incitation accrue a cacher les accidents

on the bias of intermittent demand estimates forecasting and inventory control for intermittent demand items has been a major problem in the manufacturing and supply environment croston operational research quarterly 23 1972 289 proposed a method according to which intermittent demand estimates can be built from constituent events croston s method has been reported to be a robust method but has shown more modest benefits in forecasting accuracy than expected in this research one of the causes of this unexpected performance has been identified as a first step towards improving croston s method certain limitations are identified in croston s approach and a correction in his derivation of the expected estimate of demand per time period is presented in addition a modification to his method that gives approximately unbiased demand per period estimates is introduced all the conclusions are confirmed by means of an extended simulation experiment where croston s and revised croston s methods are compared the forecasting accuracy comparison corresponds to a situation of an inventory control system employing a re order interval or product group review

an improved method for forecasting spare parts demand using extreme value theory inventory control for spare parts is essential for many organizations due to the trade off between preventing high holding cost and stockouts the lead time demand distribution plays a central role in inventory control the estimation of this distribution is problematic as the spare part demand is often intermittent and as a consequence often only a limited number of non zero data points are available in practice the well known empirical method uses historical demand data to construct the lead time demand distribution although it performs reasonably well when service requirements are relatively low it has difficulties in achieving high target service levels in this paper we improve the empirical method by applying extreme value theory to model the tail of the lead time demand distribution to make the most out of a limited number of demand observations we establish that extreme value theory can be applied to lead time demand periods computed over overlapping intervals we consider two service levels the expected waiting time and cycle service level our experiments show that our method improves the inventory performance compared to the empirical method and is competitive with the wss method croston s method and sba for a range of demand distributions

adverse selection and finite horizon insurance contracts abstract we use a particular contract to analyze three issues regarding adverse selection monopoly and the use of time within a finite horizon the description and existence of an epsilon equilibrium equilibrium the achievement of a nash equilibrium and the optimality of risk revelation among the results obtained we show that at equilibrium low risk individuals buy full insurance most of the time and high risk individuals always buy full insurance we also show that the equilibrium with risk revelation is a nash equilibrium these results are compared with those of the self selection mechanism stiglitz 1977 and of the equilibrium under moral hazard radner 1981

dynamic contracts with moral hazard and adverse selection we study a novel dynamic principal agent setting with moral hazard and adverse selection persistent as well as repeated in the model an agent whose skills are his private information faces a finite sequence of tasks one after the other upon arrival of each task the agent learns its level of difficulty and then chooses whether to accept or refuse each task in turn and how much effort to exert although his decision to accept or refuse a task is publicly known the agent s effort level is his private information we characterize optimal contracts and show that the per period utility of the agent approaches his per period utility when his skills are publicly known as the discount factor and the time horizon increase

the equivalence of lending equilibria and signalling based insurance under asymmetric information i present a model in which a continuum of individuals have stochastic idiosyncratic income shocks complete insurance is physically feasible but unattainable due to an information asymmetry income shocks are observable only by the individuals receiving them any insurance institution must therefore rely on self reporting of income innovations two ways of achieving incentive compatible self reporting are presented the first is a debt market with an explicit lending restriction the second is an insurance contract that linearly filters a signal transmitted by individuals the two are then demonstrated to be identical equilibrium consumption fluctuates in a random walk which is inefficient given the physical potential for complete insurance but is efficient given the information constraints the results are complementary to those of green 1987 but permit more general stochastic processes of income to be analyzed serial correlation of income reduces the efficiency of the insurance

trade in goods and trade in tasks an integrating framework abstract we introduce a simple but flexible analytical framework in which both trade in goods and trade in tasks arise we use this framework to provide versions of the gains from trade and the famous four ho theorems heckscher ohlin factor price equalisation stolper samuelson and rybczynski that apply to this environment we extend our framework to accommodate monopolistic competition and two way offshoring and to integrate theoretical results of the early offshoring literature

the accuracy of a modified croston procedure a modified croston procedure to forecast intermittent demand is reviewed the modified procedure published in this journal in 2004 consists of a new method for estimating the mean demand and a smoothing method for estimating the variance of the forecasted demand rate it is found that the smoothed variance estimate is based on an invalid measure of forecast accuracy moreover it is shown that the method of forecasting mean demand produces biased forecasts the accuracy of this method is assessed using simulated data and the mean square error measure and compared with croston s method and single exponential smoothing it is found that croston s method is generally more accurate than its modification particularly for strongly intermittent series

on the variance of intermittent demand estimates intermittent demand occurs at random with many time periods showing no demand at all forecasting such demand patterns constitutes a challenging exercise because of the associated dual source of variation demand intervals and demand sizes research in this area has developed rapidly in recent years with new results implemented into supply chain software solutions because of its practical implications in an inventory context both the accuracy of the forecasts and their variability sampling error of the mean have equal importance in terms of service level achievement and or inventory cost minimisation although the former issue has been studied extensively mainly building upon croston s model 1972 the latter has been largely ignored the purpose of this paper is to analyse the most well cited intermittent demand estimation procedures in terms of the variance of their estimates detailed derivations are offered along with a discussion of the underlying assumptions as such we hope that our contribution may constitute a point of reference for further analytical work in this area as well as facilitate a better understanding of issues related to modelling intermittent demands

moral hazard land fertility and sharecropping in a rural area of the philippines abstract introducing concerns about land fertility for landlords in a principal agent model of sharecropping with moral hazard we show that the optimal contract under limited commitment reflects a trade off between production and land quality maintenance using data from the philippines a model where the leasing out and contract choices are simultaneous is estimated and avoids the selectivity bias of observed contracts landlords prefer to use more incentive contracts for more fertile plots and less incentive ones when crop choices induce land overuse empirical tests reject the model of pure risk sharing in production and show the interest of taking land quality maintenance into account

currency and credit are equivalent mechanisms i study a pure exchange economy with many agents whose marginal utility of consumption is stochastically heterogeneous and independent of wealth with realized marginal utility of wealth private information i show that currency and credit are equivalent to a contract that is efficient when the privacy of information is viewed as a constraint and that the cash in advance constraint is an expression of an incentive constraint

collusion enforcement with private information and private monitoring abstract this paper shows that a cartel that observes neither costs prices nor sales may still enforce a collusive agreement by tying each firm s continuation profit to the truncated current profits of the other firms the mechanism applies to both price and quantity competition and the main features are broadly consistent with common cartel practice identified by harrington and skrzypacz 24

further toward a theory of agricultural insurance the economic theory of contracts is applied to agricultural insurance to show that given full information pareto optimal insurance contracts are actuarially fair provide full coverage and differ for each individual the information problems of moral hazard and adverse selection prevent pareto optimality from being attained several second best solutions to these problems are applied to agricultural insurance it is shown that information collection and the application of contract design principles are second best solutions which may achieve the benefits of insurance at less cost than the current practice of public subsidies in theory agricultural insurance is an efficient risk sharing mechanism in practice however agricultural insurance has been a costly means of transferring risk from farmers to governments and or other insurers to induce farmers to participate in agricultural insurance governments have borne significant subsidy costs hazell pomareda and valdes p 295 in a recent study ahsan ali and kurian aak concluded that public subsidies are necessary to make agricultural insurance viable they also showed that insurance will increase output relative to a case with no insurance thus insurance is beneficial particularly in less developed countries where increasing food supplies is a policy goal for this reason they concluded that public subsidization of insurance also is desirable their conclusions are derived from a simplified model of production with one output and one input in this article we consider a more general production model with multiple inputs and outputs we show that aak s conclusion about the benefits of insurance may not hold depending on the nature of the inputs and outputs as defined by the production function carl h nelson is an assistant professor of agricultural economics

unmediated communication in repeated games with imperfect monitoring we show that any correlated equilibrium payoff of two player repeated games with imperfect monitoring and without discounting can be reached as the nash equilibrium payoff of the game extended by a universal mechanism of unmediated communication this result holds regardless the particular concept of equlibrium involved upper lower banach or uniform equlibrium the communication mechanism is built up by using commutative one way functions these functions are designed with the help of cryptographic tools

short term contracting and strategic oil reserves the effect of short term contracting on resource extraction is studied in a two country model of international trade in oil countries planners are assumed to be fully rational with perfect information and perfect foresight contracts are assumed perfectly enforceable and complete except that short term contracts do not allow commitments to actions taken beyond the contract period we show that short term contracting limits countries opportunities for intertemporal consumption smoothing reducing their collective tolerance for temporal variation in consumption this tends to make them extract more slowly than in the efficient plan that results from long term contracting contractual relationships often outlive the contracts that govern them it is therefore common for a long term relationship to be governed by a sequence of short term contracts when these contracts allow complete control of the organization of the relationship within each contract period any outcome that can be achieved in a long term contract covering the entire life of the relationship is also feasible with a sequence of short term contracts short term contracting can nevertheless have significant effects on resource allocation because each contract must be voluntarily negotiated in the environment created by its predecessors an allocation that is acceptable to both parties as a long term contract might not be voluntarily negotiable as a sequence of short term contracts because short term contracting is so prevalent it is worth asking what sorts of relationship can be organized efficiently only by long term contract and what kinds of distortion are caused by short term contracting two kinds of answers to these questions have been given in the literature one important line of investigation considers the use of memory in contracts designed to control parties incentives under asymmetric information baron and besanko 1985 rubinstein and yaari 1983 sanchez and zapater 1985 stiglitz and weiss 1983 tirole 1986 and townsend 1982 among others have shown how parties can use

repeated principal agent relationships with lending and borrowing abstract it is shown optimal long term contracts are strictly better than a series of unrelated short term contracts for two reasons long term contracts allow risk to be spread over time and the agent s intertemporal choices provide information about the unobservable random variable

demand forecasting with four parameter exponential smoothing abstract exponential smoothing methods are powerful tools for denoising time series predicting future demand and decreasing inventory costs in this paper we develop a smoothing and forecasting method that is intuitive easy to implement computationally stable and can satisfactorily handle both additive and multiplicative seasonality even when time series contain several zero entries and large noise component we start with the classical additive holt winters method and introduce an additional smoothing parameter in the level recurrence equation all parameters are required to lie within 0 1 and estimated by minimizing the one step ahead forecasting errors in the sample doing so the errors decrease substantially especially for the time series with strong trends the newly developed method produces more accurate short term out of sample forecasts than the classical holt winters methods and the holt winters methods with damped trend the performance of the method is evaluated using a battery of real quarterly and monthly time series from the m3 competition a simulation study is conducted for further in depth analysis of the method under different demand patterns we developed and justified the use of a symmetric relative efficiency measure that allows researchers ad practitioners to evaluate the performance of different smoothing and forecasting methods

exploiting elapsed time for managing intermittent demand for spare parts we present an intermittent demand forecasting method that conditions on the elapsed time since the last demand occurrence to anticipate incoming demand and show using empirical data that this can substantially reduce both stock investment and lost revenue for spare parts management we extensively benchmark our method against existing forecasting and bootstrapping methods on forecast accuracy and inventory performance and demonstrate that its performance is robust under general conditions our method is the first to incorporate that activities at the demand side such as aggregation of demand preventive and corrective maintenance can lead to a positive relation between demand size and inter arrival time of demand occurrences by anticipating incoming demand our method offers substantial financial gains

the effect of information sharing between lenders on access to credit cost of credit and loan performance evidence from a credit registry introduction abstract using a rich dataset from a commercial bank in albania we utilize the introduction of a public credit registry by the albanian central bank in january 2008 as a natural experiment to analyze the effect of information sharing between lenders on 1 access to credit 2 cost of credit and 3 loan performance our results suggest that information sharing by means of a credit registry does not affect access to or cost of credit but improves loan performance specifically loans granted after the introduction of the credit registry are 3 points less likely of turning problematic representing a 35 reduction of the overall sample average arrear probability we further find that the effect is more pronounced for repeat borrowers and in areas where competition is weak this indicates that information sharing among lenders improves loan performance mainly by disciplining borrowers to repay in their concern about future access to credit

on the empirical performance of t s s heuristics the periodic t s s policies have received considerable attention from the academic literature determination of the optimal parameters is computationally prohibitive and a number of heuristic procedures have been put forward however these heuristics have never been compared in an extensive empirical study such an investigation on 3055 skus is carried out in this paper our study provides insights into the performance of t s s heuristics also in relation to demand forecasting the results show that naddor s heuristic is best able to minimize the total cost however the normal and power approximations achieve more efficient solutions in that backorder volumes are smaller at the same inventory levels indicating the potentially superior performance of these methods if the balancing of holding and backorder costs can be improved the results also show that for all heuristics the sba variant of the croston forecasting method significantly outperforms croston as well as single exponential smoothing ses

banking and insurance abstract this paper studies the economic role of financial institutions in economies where agents incomes are subject to privately observable idiosyncratic random events the information structure precludes conventional insurance arrangements however a financial institution perhaps best viewed as a savings bank can provide partial insurance by generating a time pattern of deposit returns that redistributes wealth from agents with high incomes to those with low incomes resulting in a level of expected utility higher than that achievable in simple security markets insurance is incomplete because the bank faces a tradeoff between provision of insurance and maintenance of private incentives

lumpy demand forecasting using neural networks abstract the current study applies neural network nn modeling in forecasting lumpy demand it is to the best of our knowledge the first such study our study compares the performance of nn forecasts to those using three traditional time series methods single exponential smoothing croston s method and the syntetos boylan approximation we find nn models to generally perform better than the traditional methods using three different performance measures we also independently validate earlier findings that the syntetos boylan approximation performs better than the croston s and single exponential smoothing methods in lumpy demand forecasting

forecasting method for noisy demand abstract exponential smoothing methods are very commonly used for forecasting demand regarding the process of forecasting demand the main approach towards the selection and optimisation of alternative methods relates to the minimisation of forecast error measures such as the mean square error mse with regard to pegels classification of usage of proper forecasting methods hw methods additive and multiplicative are appropriate for demand with trend and seasonality which corresponds to b 2 and b 3 but hw methods are not accurate enough for demand with large noise that is often a property of real data in this paper we present improved an hw method for demand with noise and we demonstrate that a reduction in forecast error mse can be reached from the results we prove that the proposed method is more accurate than the existing ones and that it is the proper choice for forecasting noisy demand furthermore we show that essential reduction of supply chain costs can be achieved if we use improved the hw method for joined optimisation

repeated insurance contracts with differential learning using principal agent and insurance models several authors recently have shown that inefficiencies arising from asymmetric information between economic agents can be eliminated if the relationship between the agents is enduring and the future is not heavily discounted dionne 1983 radner 1985 radner 1986 rubinstein 1979 rubinstein and yaari 1983 in those models the efficient actions of the parties are common knowledge or it is common knowledge that the party with the private information knows the efficient actions the efficient outcomes are implemented by a statistical scheme comparing realized outcomes with what should have arisen if the efficient actions had been taken this paper studies an insurance model in which the full information efficient actions are not known neither the insurer nor the customer knows the customer s risk characteristics however over time the customer learns about his characteristics and may pass this information on to the insurer though the insurer cannot verify the truthfulness of these reports a customer has good days and bad days on good days it is easier for the customer to prevent accidents the customer s type is the probability with which he has a good day efficient risk sharing between such a risk averse customer and a risk neutral insurer would protect the customer against the randomness in his ability and against loss due to an accident however the insurer appears to be disadvantaged since it cannot observe the customer s actions a moral hazard problem and the customer may become better informed about his own type an adverse selection problem one wonders whether the customer might hide behind a cloak of ignorance about this type in order to exploit his informational advantage in fact i show that in the infinitely repeated model the insurer writing a good faith policy for the customer does implement the full information competitive outcome the insurer takes as true the customer s ability reports and updates its beliefs about the agent s type if the customer s record with the insurer is satisfactory then the insurer offers to this customer the best full information zero profit contract for a customer whose type is given by the mean of these updated beliefs otherwise a high premium is charged until a satisfactory record is regained the martingale version of the law of the iterated

joint optimisation of demand forecasting and stock control parameters abstract exponential smoothing methods are very commonly used for forecasting demand in a supply chain context when estimating the parameters used in these methods a common practice is to optimise only the smoothing constants and not the initial parameter values in this paper we show that if we treat initial values as well as smoothing constants as decision variables a considerable reduction in forecast error can be achieved additionally the optimisation of the forecasting method should not be treated separately from the production or inventory model in which forecasts are used the case of a centralised supply chain with an order up to inventory policy shows that calculated forecasts of demand determined by minimising mean absolute error mae or mean squared error mse are not optimal finally a method for simultaneous optimisation of demand forecasting and a stock control policy is described initial and smoothing parameters in the forecasting methods can be determined to minimise the total costs

repeated insurance contracts and moral hazard abstract an attempt is made to account for the frequently observed phenomenon of insurance companies offering discounts to clients who possess a favorable record of past claims we argue that such discounts provide a mechanism which enables both insurer and insured to counteract the inefficiency which arises from moral hazard

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

does the source of capital affect capital structure prior work on leverage implicitly assumes capital availability depends solely on firm characteristics however market frictions that make capital structure relevant may also be associated with a firm s source of capital examining this intuition we find firms that have access to the public bond markets as measured by having a debt rating have significantly more leverage although firms with a rating are fundamentally different these differences do not explain our findings even after controlling for firm characteristics that determine observed capital structure and instrumenting for the possible endogeneity of having a rating firms with access have 35 more debt copyright 2006 oxford university press

effects of correlation on intermittent demand forecasting and stock control abstract this study investigates the effects of three different types of correlation on forecasting and stock control of intermittent demand items applying appropriate forecasting and stock control methods to theoretically generated compound poisson demand data we show that correlation in intermittent demand does play a role in forecast quality and stock control performance negative autocorrelation levels lead to higher service levels than positive values while cost does not significantly change our results also show that high intermittency levels intensify these changes in service level we also show that cross correlation produces results in the opposite direction of autocorrelation in size or intervals that is positive negative cross correlation leads to higher lower service levels

insurability and moral hazard in agricultural insurance markets pareto optimal and constrained pareto optimal all risk insurance contracts are studied conditions required for emergence of competitive insurance markets are isolated and discussed full insurance contracts are shown to be dominated by contracts involving coinsurance and deductibles if insurers are pseudo risk averse the effect of moral hazard on all risk agricultural insurance indemnity schedules is examined results for indemnity schedules under moral hazard and constant absolute risk aversion show that providing farmers with the incentives to take appropriate actions may imply lower deductibles in the presence of moral hazard than in the absence of moral hazard

on repeated moral hazard with discounting in this paper we analyze optimal contracts in an infinitely repeated agency model in which both the principal and agent discount the future we show that there is a stationary representation of the optimal contract when the agent s conditional discounted expected utility is used as a state variable this representation reduces the multi period problem to a static variational problem which can be analyzed using standard variational techniques this reduction is used to obtain several properties of the contract

aggregate fluctuations interest rates and repeated insurance under private information using a linear quadratic framework i show i the formal equivalence of lending and optimal insurance when information about states is private ii that lending equilibria induce the serial correlation patterns of aggregate and individual stochastic processes of consumption to be identical even if the corresponding income processes differ iii the influence of the interest rate and the underlying serial correlation of the aggregate income process on potential insurance available in lending markets iv the breakdown of individual rationality of the repeated private information contract and corresponding equilibria via defection to autarky as an initial exploration of the force needed by an external mechanism that might prevent this defection i analyze the average gain from defection finding that the average gain from defection increases with the serial correlation of idiosyncratic income associating defection with low interest rates

pricing weather insurance with a random strike price the ontario ice wine harvest weather insurance within the agricultural sector has been limited by the difficulty in defining the appropriate weather event and in pricing the product we develop a new pricing method for weather insurance under situations where returns depend not only on the occurrence of the weather event but also its timing the method is used to price weather insurance for ice wine because the harvest quantity of grapes for ice wine degrades over time the strike value on the weather event measured as harvestable hours is random we develop a monte carlo method to estimate the premium

trade in producer services and returns due to specialization under monopolistic competition this paper demonstrates that liberalizing trade in services while yielding efficiency gains associated with comparative advantage may yield additional gains for both importing and exporting countries because of an increased division of labor a model is developed in which producer services coordinate and control the specialized members of complex production processes the model is used to analyze trade in services and its effect on the division of labor and the realization of returns from specialization this differs from the recent literature on traded services and specialization because of the explicit role introduced for services in the specialization process

the multiperiod principal agent problem in repeated principal agent models long term contracts can improve on short term contracts only if they commit either principal or agent to a payoff in some future circumstance lower than could be obtained from a short term contract negotiated if that circumstance occurs we show that efficient contracting under moral hazard alone does not require long term commitment from the principal provided a short term contract can punish the agent sufficiently in a sense made precise it requires no commitment from the agent either then linking payoffs in one period to outcomes in previous periods does not improve the tradeoff between incentives and risk sharing

intermittent demand forecasting an empirical study on accuracy and the risk of obsolescence intermittent demand items account collectively for considerable proportions of the total stock value of any organization forecasting the relevant inventory requirements constitutes a very difficult task and most work in this area is based on croston s estimator that relies upon exponentially smoothed demand sizes and inter demand intervals this method has been shown to be biased and a number of variants have been introduced in the literature including the recently proposed tsb method that updates the demand probability instead of the demand interval and in doing so reacts faster to decreasing demand the tsb has been shown theoretically to be unbiased for all points in time but its empirical performance has not been investigated yet and this constitutes one of the objectives of our work more generally we explore the empirical performance of forecasting methods used in an intermittent demand context paying particular attention to the effects and implications of the smoothing constant values employed for updating purposes we do so by means of experimentation on large empirical datasets from the military sector and automotive industry the results enable insights to be gained into the sensitivity of the various methods forecasting and stock control performance to the smoothing constant values used the paper concludes with an agenda for further research