note on the open loop von stackelberg equilibrium in the cartel versus fringe model one of the ways to model the supply side of the world oil market is by means of the cartel versus fringe model and to employ the open loop von stackelberg equilibrium concept this note shows that the equilibrium as presented in the literature does not satisfy the optimality conditions for the open loop equilibrium the authors show furthermore that in contrast with the prevailing view the equilibrium can display discontinuous price trajectories copyright 1992 by royal economic society

demand seasonality in retail inventory management abstract we investigate the value of accounting for demand seasonality in inventory control our problem is motivated by discussions with retailers who admitted to not taking perceived seasonality patterns into account in their replenishment systems we consider a single location single item periodic review lost sales inventory problem with seasonal demand in a retail environment customer demand has seasonality with a known season length the lead time is shorter than the review period and orders are placed as multiples of a fixed batch size the cost structure comprises of a fixed cost per order a cost per batch and a unit variable cost to model retail handling costs we consider four different settings which differ in the degree of demand seasonality that is incorporated in the model with or without within review period variations and with or without across review periods variations in each case we calculate the policy which minimizes the long run average cost and compute the optimality gaps of the policies which ignore part or all demand seasonality we find that not accounting for demand seasonality can lead to substantial optimality gaps yet incorporating only some form of demand seasonality does not always lead to cost savings we apply the problem to a real life setting using point of sales data from a european retailer we show that a simple distinction between weekday and weekend sales can lead to major cost reductions without greatly increasing the complexity of the retailer s automatic store ordering system our analysis provides valuable insights on the tradeoff between the complexity of the automatic store ordering system and the benefits of incorporating demand seasonality

on the structure of lost sales inventory models we provide a new approach to the structural analysis of the standard lost sales inventory system this approach is we think easier to work with than the original one we also derive new bounds on the optimal policy then we show that more variable demand leads to higher cost finally we extend the analysis to several important variations of the basic model

natural resources curse or blessing are natural resources a curse or a blessing the empirical evidence suggests that either outcome is possible this paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources these include that a resource bonanza induces appreciation of the real exchange rate deindustrialization and bad growth prospects and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law corruption presidential democracies and underdeveloped financial systems another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad induces corruption especially in nondemocratic countries and keeps in place bad policies finally resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets the survey also offers some welfare based fiscal rules for harnessing resource windfalls in developed and developing economies

on agreements in a nonrenewable resource market a cooperative differential game approach abstract we consider a nonrenewable resource duopoly with economic exhaustion we characterize the set of pareto efficient equilibria we show that when firms are sufficiently patient there exists no pareto efficient agreement that yields short run gains with respect to the noncooperative equilibrium given a pair of stocks there exists a unique interior pareto efficient agreement we characterize the set of stocks where a pareto efficient agreement results in larger discounted sum of profits for both players we show that social welfare under the interior pareto efficient agreement is smaller than under non cooperation despite the gains from a more cost effective extraction of the resources under an agreement

instability of the u s money demand function this paper surveys the two major episodes of instability of the u s money demand function known respectively as the mystery of missing money and the great velocity decline it also assesses the recent literature on open economy money demand models and their usefulness in explaining the puzzling behavior of money demand manifested shortly after the transition to floating exchange rates copyright 1991 by blackwell publishers ltd

an oligopoly fringe non renewable resource game in the presence of a renewable substitute abstract in accordance with recent empirical evidence we model the oil market as an oligopoly facing a fringe as well as competition from renewable resources within this framework we fully characterize i e for all vectors of initial resource stocks the equilibrium extraction paths of the fringe and the oligopolists we show that i the sequence of extraction in equilibrium crucially depends on the oligopolists market power ii there always exists a phase of simultaneous supply of the oligopolists and the fringe iii the oligopolists pursue a limit pricing strategy near the end of the extraction horizon and iv an increase in the reserves of the fringe may lead to a decrease in their initial supply

monopoly extraction of a nonrenewable resource facing capacity constrained renewable competition abstract this paper studies monopoly extraction of a nonrenewable resource with the presence of a competitively supplied capacity constrained renewable substitute the monopolist staves off the renewable supply when the latter becomes competitive and then lets the resource price jump up

the utility of cash flow forecasts in the management of corporate cash balances abstract this paper considers the stochastic cash balance problem a dynamic simple policy dsp is proposed to minimise transaction costs under a general cost structure when the cash flows are not independently or identically distributed the validity of the approach is demonstrated using the scenario of double exponentially distributed cash flows considered by penttinen a data set from a large multinational is used to demonstrate the practical application of the dsp to provide conditional expectations of future cash flows a time series model is developed to provide forecasts the performance of the dsp on these cash flows achieved a 16 saving in average transaction cost over the penttinen model the saving due to the forecasting model over the assumption that the cash flows exhibit a constant mean is a function of the time series structure of the relevant cash flows for the example data the benefit of using the bespoke forecasting model over the constant mean was only 2

the future of branch cash holdings management is here new markov chains abstract liquidity management is one of the main concerns of the banking sector since it provides control in key areas such as treasury management working capital financing and business valuation under the assumption that branch efficiency makes a fundamental contribution towards the effective performance of the global banking institution this paper provides a new methodology markov chains by blocks in order to achieve knowledge on the branch cash holdings conditions which ensure optimal cash holdings recurring properties which help to better predict cash holdings shifts and the study of the branch cash holdings steady states using ergodic theory these findings will let bank managers know the time validity of the current cash holdings this is a crucial advantage to ensure efficient cash management while helping keep banking institutions on sound financial footing by guaranteeing the compulsory by law safety cushion it also allows bank managers to make sound decisions upon fund investments this incipient mathematical framework based on the re definition of classical theory on markov chains provides an alternative standpoint which may also apply to those dynamical systems which can be categorized into groups of similar features

a limited dependent analysis of the choice of regular labour contract in seasonal agriculture the paper examines both theoretically and empirically the factors determining the demand for regular labour in seasonal agriculture in an implicit contract framework it is argued that there are hoarding costs of regular labour in the slack period when there is not much work to be done consequently the number of regular labour employed is constrained by the hoarding cost where larger employment intensive farms tend to hire more regular labour evidence from the icrisat villages in india too show that though the marginal costs of regular labour are zero there are significant hoarding costs of regular labour among small farms so that larger farmers are the major demanders of regular labour estimates of the double hurdle model jointly determining the probability of hiring regular labour and demand for regular labour hours if a regular labour is hired are shown to be an improvement over univariate tobit estimates of the demand for regular labour hours only

approximation algorithms for perishable inventory systems we develop the first approximation algorithms with worst case performance guarantees for periodic review perishable inventory systems with general product lifetime for both backlogging and lost sales models the demand process can be nonstationary and correlated over time capturing such features as demand seasonality and forecast updates the optimal control policy for such systems is notoriously complicated thus finding effective heuristic policies is of practical importance in this paper we construct a computationally efficient inventory control policy called the proportional balancing policy for systems with an arbitrarily correlated demand process and show that it has a worst case performance guarantee less than 3 in addition when the demands are independent and stochastically nondecreasing over time we propose another policy called the dual balancing policy which admits a worst case performance guarantee of 2 we demonstrate through an extensive numerical study that both policies perform consistently close to optimal

strong time consistency in the cartel versus fringe model due to developments on the oil market in the 1970s the theory of exhaustible resources was extended with the cartel versus fringe model to characterize markets with one big coherent cartel and a large number of small suppliers called the fringe because cartel and fringe are leader and follower the von stackelberg solution concept is appropriate for the supply side of this market the solution for the cartel versus fringe model presented in the previous literature proved to be time inconsistent for a large plausible range of values for extraction costs and initial reserves this paper provides a strongly time consistent solution for the cartel versus fringe model

dynamically consistent oil import tariffs the standard solution of the open loop optimal import tariff is normally time inconsistent the paper shows why and derives the dynamically consistent markov perfect tariff the two tariffs are compared they differ except for a special class of import demands the time paths of tariffs and the welfare cost of an inability to commit are calculated for a dominant importer the welfare costs of the inability to commit are small if its market share

pareto improvement and joint cash management optimisation for banks and cash in transit firms abstract improving the atm cash management techniques of banks has already received significant attention in the literature as a separate optimisation problem for banks and the independent firms that supply cash to automated teller machines this article concentrates instead on a further possibility of cost reduction optimising the cash management problem as one single problem doing so contractual prices between banks and the cash in transit firms can be in general modified allowing for further cost reduction relative to individual optimisations in order to show the pertinence of this procedure we have determined possible pareto improvement re contracting schemes based on a baumol type cash demand forecast for a hungarian commercial bank resulting in substantial cost reduction

determinants of occupational change and mobility in rural india with a view to redress the dearth of economic analysis on occupational dynamics in rural household economies this study examines the nature and characteristics of occupational change and mobility in rural india using the unique wider data set from six villages in west bengal india the factors causing a change of primary occupation among those who tried to change occupation over a twelve month recall period has been analysed bivariate probit estimates jointly determining the probability of trying to change occupation and having been successful suggest that success in changing occupation depends crucially on socially constructed status being older male from larger farming families or having higher schooling experience they also exemplify the effects of regional diversity levels of prosperity and different patterns of employment between agricultural and non agricultural activities

imperfect competition in the international energy market a computerized nash cournot model this paper describes the conceptual structure properties and solution approach of a computerized model of the international energy market the model treats energy producers as players in a multistage noncooperative game the goal of each player or cartel of players is assumed to be maximization of discounted profit subject to technical political and resource constraints the model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss the open loop nash equilibrium the model integrates the theory of exhaustible resources due to hotelling and the theory of oligopoly due to nash and cournot although useful as a teaching device to illustrate theoretical results its main function is to facilitate analysis of real world resource problems the model is flexible allowing the user to specify not only cost demand and reserve information but also assumptions about who belongs to what coalition two shortcomings deserve note t

dynamic programming models and algorithms for the mutual fund cash balance problem fund managers have to decide the amount of a fund s assets that should be kept in cash considering the trade off between being able to meet shareholder redemptions and minimizing the opportunity cost from lost investment opportunities in addition they have to consider redemptions by individuals as well as institutional investors the current performance of the stock market and interest rates and the pattern of investments and redemptions that are correlated with market performance we formulate the problem as a dynamic program but this encounters the classic curse of dimensionality to overcome this problem we propose a provably convergent approximate dynamic programming algorithm we also adapt the algorithm to an online environment requiring no knowledge of the probability distributions for rates of return and interest rates we use actual data for market performance and interest rates and demonstrate the quality of the solution compared to the optimal for the top 10 mutual funds in each of nine fund categories we show that our results closely match the optimal solution in considerably less time and outperform two static newsvendor models the result is a simple policy that describes when money should be moved into and out of cash based on market performance

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

carbon taxation opec and the end of oil abstract i develop a differential game between an oil cartel and an importer investing in research and development r d to reduce the cost of a green substitute to oil in equilibrium the cartel is forced to deter the substitute which thus imposes a price ceiling falling over time credible carbon taxes are below the pigovian level implying the importer cannot internalise the full pollution externality much less capture resource rents without carbon pricing the importer curtails long run pollution using a costly r d programme normatively climate policy will be more expensive if relying on green r d programmes only

modeling the demand for narrow money in the united kingdom and the united states abstract despite the importance of well specified empirical money demand functions for inference forecasting and policy problems in modeling have arisen concerning the economic theories of money demand the data institutional frameworks financial innovation and econometric implementation by developing constant data coherent m 1 demand equations for the u k and the u s we investigate these issues and explain such puzzles as missing money the great velocity decline and the recent explosion in m 1 the endogeneity of money the lucas critique and the non invertibility of our m 1 models are also discussed

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

on price taking behavior in a nonrenewable resource cartel fringe game abstract we consider a nonrenewable resource game with one cartel and a set of fringe members we show that i the outcomes of the closed loop and the open loop nonrenewable resource game with the fringe members as price takers the cartel fringe game a la salant 1976 coincide and ii when the number of fringe firms becomes arbitrarily large the equilibrium outcome of the closed loop nash game does not coincide with the equilibrium outcome of the closed loop cartel fringe game thus the outcome of the cartel fringe open loop equilibrium can be supported as an outcome of a subgame perfect equilibrium however the interpretation of the cartel fringe model where from the outset the fringe is assumed to be price taker as a limit case of an asymmetric oligopoly with the agents playing nash cournot does not extend to the case where firms can use closed loop strategies

is there really a green paradox abstract in the absence of a co2 tax the anticipation of a cheaper renewable backstop increases current emissions of co2 since the date at which renewables are phased in is brought forward and more generally future emissions of co2 will decrease the effect on global warming is unclear green welfare falls if the backstop is relatively expensive and full exhaustion of fossil fuels is optimal but may increase if the backstop is sufficiently cheap relative to the cost of extracting the last drop of fossil fuels plus marginal global warming damages as then it is attractive to leave more fossil fuels unexploited and thus limit co2 emissions we establish these results by analyzing depletion of non renewable fossil fuels followed by a switch to a clean renewable backstop paying attention to timing of the switch and the amount of fossil fuels remaining unexploited we also discuss the potential for limit pricing when the non renewable resource is owned by a monopolist finally we show that if backstops are already used and more backstops become economically viable as the price of fossil fuels rises a lower cost of the backstop will either postpone fossil fuel exhaustion or leave more fossil fuel in situ thus boosting green welfare however if a market economy does not internalize global warming externalities and renewables have not kicked in yet full exhaustion of fossil fuel will occur in finite time and a backstop subsidy always curbs green welfare

income mobility in rural india this paper offers a detailed analysis of income mobility in rural india during 1968 1969 to 1970 1971 it focuses on 1 the pattern of upward income mobility among a section of the cultivating poor and 2 some of the key factors that enabled them to overcome poverty the analysis is based on a panel survey of 4118 rural households from the additional rural income survey the author assumes that 16 rupees per person per month at 1960 1961 prices constitutes an upper limit for a minimum daily calorie requirement in rural areas the analysis shows that out of those poor in 1968 over 1 2 ceased to be poor over 12 became poorer and about 36 remained poor without becoming poorer in 1970 out of the not poor in 1968 over 3 4 remained not poor while the remaining became poor in 1970 with the exception of the cultivating not poor who remained not poor all other categories reported substantial income changes in their average incomes during the period in question while the absolutely impoverished earned much lower incomes there were others particularly the poor ceased to be poor who registered impressive income gains comparison of the base year income levels of the 3 subsets of the cultivating poor suggested that on average the poorest of the poor fared better than the moderately poor this conclusion was further supported by an analysis of income mobility within a subset comprising the cultivating poor who ceased to be poor the bulk of these were relatively low income households that earned substantially higher incomes

inference in cointegrating models uk m1 revisited the paper addresses the practical determination of cointegration rank this is difficult for many reasons deterministic terms play a crucial role in limiting distributions and systems may not be formulated to ensure similarity to nuisance parameters finite sample critical values may differ from asymptotic equivalents dummy variables alter critical values often greatly multiple cointegration vectors must be identified to allow inference the data may be 1 2 rather than 1 1 altering distributions and conditioning must be done with care these issues are illustrated by an empirical application of multivariate cointegration analysis to a small model of narrow money prices output and interest rates in the uk copyright 1998 by blackwell publishers ltd

can carbon tax eat opec s rents abstract we consider the optimal emission tax for a stock pollutant when the pollutant flow is also regulated by a resource exporting cartel we consolidate clarify and generalize a set of previous results to obtain clear isolation of the pigouvian and trade policy components of the tax because of the trade policy component the tax can shift more rents from the cartel than the pollution causes damage related costs this leads to the possibility that the pollution problem accompanied by the coordination of taxation can bring about net benefits at the expense of the cartel

the demand of liquid assets with uncertain lumpy expenditures abstract we consider an inventory model for a liquid asset where the per period net expenditures have two components one that is frequent and small and another that is infrequent and large we give a theoretical characterization of the optimal management of liquid asset as well as of the implied observable statistics we use our characterization to interpret some aspects of households currency management in austria as well as the management of demand deposits by a large sample of italian investors

relaxing the cash in advance constraint at a fixed cost are simple trigger target portfolio rules optimal this paper studies the microeconomic foundations of trigger target rules of portfolio demand such as the demand for money it allows an agent to relax her cash in advance constraint by paying a fixed transactions cost to move between money and the interest bearing asset an example is generated where the potential of being liquidity constrained in order to avoid incurring the transactions cost can cause excessive nonconcavities of the value function in a dynamic program such that simple trigger target rules of money demand are suboptimal

stackelberg versus cournot a differential game approach abstract we propose an infinite horizon differential oligopoly game where at each point in time m stackelberg leaders and n m stackelberg followers exploit a common pool renewable resource and sell their harvest in the marketplace at a price that depends on total harvest we derive a feedback generalized stackelberg nash cournot equilibrium a generalization of the feedback stackelberg equilibrium nesting feedback stackelberg and feedback cournot as special cases we proceed with a comparison between the feedback stackelberg and the feedback cournot equilibria and find a number of interesting results in contrast with static oligopoly theory as to the relative efficiency of the two equilibria we show that the cournot equilibrium can be more efficient than the stackelberg equilibrium this holds true in the short run at the steady state and in terms of discounted welfare

temporary natural resource cartels abstract we analyze the behavior of a nonrenewable resource cartel that anticipates being forced at some date in the future to break up into an oligopolistic market in which its members will then have to compete as rivals under reasonable assumptions about the value function of the individual firms in the oligopolistic equilibrium that follows the breakup we show that the cartel will then produce more over the same interval of time than it would if there were no threat of dissolution and that its rate of extraction is a decreasing function of the cartel s life that there are circumstances under which the cartel will attach a negative marginal value to the resource stocks in which case the rate of depletion will be increasing over time during the cartel phase that for a given date of dissolution the equilibrium stocks allocated to the post cartel phase will increase as a function of the total initial stocks whereas those allocated to the cartel phase will increase at first but begin decreasing beyond some level of the total initial stocks

inventory control in a fluctuating demand environment we present an inventory model where the demand rate varies with an underlying state of the world variable this variable can represent economic fluctuations or stages in the product life cycle for example we derive some basic characteristics of optimal policies and develop algorithms for computing them in addition we show that certain monotonicity patterns in the problem data are reflected in the optimal policies

a periodic review inventory model with demand influenced by promotion decisions in this paper we use a markov decision process mdp to model the joint inventorypromotion decision problem the state variable of the mdp represents the demand state brought about by changing environmental factors as well as promotion decisions the demand state in a period determines the distribution of the random demand in that period optimal inventory and promotion decision policies in the finite horizon problem are obtained via dynamic programming under certain conditions we show that there is a threshold inventory level p for each demand state such that if the threshold is exceeded then it is desirable to promote the product for the proportional ordering cost case the optimal inventory replenishment policy is a base stock type policy with the optimal base stock level dependent on the promotion decision

optimal tariffs on exhaustible resources we characterize the markov perfect equilibria of two games in which oligopsonistic importers of an exhaustible resource confront competitive suppliers who have rational expectations the games differ only in the timing of moves or the speed with which participants can adjust their plans the optimal tariff when sellers move first are less flexible differs considerably from that in which buyers move first and sellers retain more control over intertemporal arbitrage opportunities if the initial stock is small buyers suffer a disadvantage from being the first mover this is reversed if the stock is large

learning and price volatility in duopoly models of resource depletion the aim of this paper is to provide a theoretical model that can account for price fluctuations in depletable resource markets we do so by introducing learning into a hotelling style duopoly model of optimal resource depletion before the depletable resource becomes scarce the self confirming equilibrium of the model mirrors noncooperative rational expectations equilibrium in that supply is high and price is low although learning does induce occasional upward price spikes that are followed by a long period of falling price once the depletable resource becomes scarce the dynamics of the market change significantly with the self confirming equilibrium mirroring the cooperative rather than noncooperative rational expectations equilibrium supply is low and price is high price spikes still occur but against a background of increasing prices when scarcity is sufficient then the market is permanently in a self confirming equilibrium that is equivalent to cooperative rational expectations equilibrium

opec unconventional oil and climate change on the importance of the order of extraction we show that opec s market power contributes to climate change by enabling producers of relatively expensive and dirty oil to start producing before opec reserves are depleted we examine the importance of this extraction sequence effect by calibrating and simulating a cartel fringe model of the global oil market while welfare net of climate damage under the cartel fringe equilibrium can be significantly lower than under a first best outcome almost the entire welfare loss is due to the sequence effect of opec s market power in our benchmark calibration the cost of the sequence effect amounts to 15 trillion us which corresponds to 97 percent of the welfare loss moreover we find that an increase in non opec oil reserves decreases global welfare in a counterfactual world without non opec oil global welfare would be 13 trillion us higher 10 trillion us of which is due to lower climate damages

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

the management of near money in the miller orr model is not optimal the most prominent model of the transactions demand for money that incorporates the availability of more than one interest bearing asset is that of miller and orr 1968 this three asset model is an extension of their simpler two asset money bonds model in which money is managed as an inventory with the objective of minimizing holding and transactions costs the extended model is used in graduatelevel textbooks to show that a corporate money manager facing an array of assets will behave much like the manager faced with a choice between money and only one type of security so that the simple model is an adequate basis for modeling the demand for money 1 in empirical work a similar belief is reflected in implementations of the transactions model of money demand that utilize a broad definition of money as though transactions motives will induce a money manager to handle a spectrum of near money assets in the same way as the medium of exchange the miller orr model appears to support such interpretations because in its three asset version the interrnediate interest bearing asset is managed in a fashion similar to that of non interest bearing money but when miller and orr solve this extended version of their model they neglect the corner solution that would allow the manager to hold only the highest yielding asset in this note i show that when the corner solution is

is the french mobile phone cartel really a cartel abstract france telecom ft sfr and bouygues telecom bt have been fined by france s conseil de la concurrence cc for organizing a mobile phone cartel with stable market shares one half one third and one sixth respectively and for directly exchanging commercial information while not contesting the legal decision it is argued here that the economic reasoning is flawed 1 as the cc made much of the firms stable market shares we have first followed this line of reasoning by considering that the market shares are quotas under uniform costs even if there is a general incentive to form a monopolistic cartel bt was too small for it to be worth its while to join it it is not necessary to exchange information directly to coordinate market shares and prices effectively all partial cartels are unlikely 2 we then departed from the cc by considering that the non uniform market shares are explained by the costs in cournot competition this allows costs to be deduced from the observed market shares by assuming that they are kept the same when switching from cournot competition to any form of cartel we deduced that market shares cannot be other than stable and non uniform any monopoly is unlikely to come about because ft has negative incentives to form a monopolistic cartel no partial cartels of two operators are viable because at least one member would lose out the paper also shows that stackelberg competition is unlikely as well as bertrand edgeworth competition in conclusion cournot competition is the only arrangement that guarantees no losses to all operators

are renewable energy policies climate friendly the role of capacity constraints and market power abstract this paper studies the impacts of renewable energy support policies on energy prices fossil fuel supply and thus carbon emissions from fossil fuels such supports are climate friendly if the renewables are already competitive against fossil fuels but if the renewables are not yet competitive the climate change impacts are often ambiguous and are sensitive to capacity constraints of renewables production and to the fossil fuel market structure if the renewables do not have capacity constraints then the subsidies are subject to the green paradox under perfect competition but might be climate friendly under monopoly supports for capacity constrained renewables under perfect competition lead to more current fossil fuel supply but delay fossil fuel exhaustion time and these effects are reversed under monopoly our results highlight the importance of considering the long term effects on fossil fuel supply as well as capacity constraints and market power in designing renewable energy policies and evaluating their carbon footprints

casual and regular contracts workers self selection in the rural labour markets in india the article examines workers choice between casual and regular contracts it departs from existing theories in that in addition to wage considerations it highlights the significance of time and credit constraints results obtained from the icrisat villages in india suggest that risk averse landless labourers ought to prefer casual to regular contracts because earnings from casual contracts are higher however this argument gets strongly modified once we consider that a large part of regular wages are received in advance and that the comparative attractiveness of regular contracts depends crucially on whether labourers have access to credit and other jobs

a cap and trade commitment policy with allowance banking we examine the planner s dynamic regulation problem in an emission trading system ets with allowance banking the planner sets the emissions cap for the next period after the current period allowance market has cleared but before knowing the next period s abatement cost realization this creates a time consistency problem when banking is possible we examine two policies to overcome the consistency problem a commitment solution and the markov perfect solution we show that the endogenous price floor generated by the banking demand becomes an integral feature of the two policies hence they can be best described as hybrid policies that combine elements from emissions taxes and tradable allowances this reveals new welfare implications that have an influence on instrument choice in the traditional prices versus quantities setup we compare the expected welfare outcomes of four different policy instruments the commitment policy the markov policy a pigouvian tax and a no banking ets we show that allowing banking can yield welfare gains compared to tax and quantity regulation with or without commitment

modeling of financial supply chain the research work on supply chain management has primarily focused on the study of materials flow and very little work has been done on the study of upstream flow of money in this paper we study the flow of money in a supply chain from the viewpoint of a supply chain partner who receives money from the downstream partners and makes payments to the upstream partners the objective is to schedule all payments within the constraints of the receipt of the money a penalty is to be paid if payments are not made within the specified time any unused money in a given period can be invested to earn an interest the problem is computationally complex and non intuitive because of its dynamic nature the incoming and outgoing monetary flows never stop and are sometimes unpredictable for tractability purposes we first develop an integer programming model to represent the static problem where monetary in flows and out flows are known before hand we demonstrate that even the static problem is np complete first we develop a heuristic to solve this static problem next the insights derived from the static problem analysis are used to develop two heuristics to solve the various level of dynamism of the problem the performances of all these heuristics are measured and presented

homogeneity and the transactions demand for money the paper presents the properties of money demand implied by the frenkel jovanovic 1980 inventory model without approximation the money demand function is implicitly defined by the first order condition of the model from the implicit function we show that the elasticities of money demand satisfy a set of homogeneity conditions we also show that increasing transactions cost increases the cash flow elasticity the interest elasticity in absolute value and the uncertainty elasticity but decreases the transactions cost elasticity if the ratio of cash flow uncertainty to the transactions variable is small then the interest elasticity is greater than 1 2 in contrast it lies between 71 and 1 2 when the approximation method is applied

cash management in a randomly varying environment we study a cash management system in which the distribution of the cash flow xn in period n 1 2 depends on the state in of a randomly varying environment sufficient conditions are found for the optimality of a simple transfer rule generalizing and partially improving the well known results for the classical case with i i d cash flows these and further structural results obtained for the cash balance are shown to reduce the computational effort drastically in determining an optimal transfer rule in addition structural and computational results w r t the environment are derived finally some examples are given for economic and statistical environments and their interactions with the cash flow process

consumer surplus enhancing cooperation in a natural resource oligopoly abstract in this study we use a differential game to illustrate that cooperation among oligopolists selling a common pool renewable resource may lead not only to higher industrial output consumer surplus and resource stock in the stationary equilibrium but also a greater discounted sum of consumer surplus a priori this finding is not straightforward an increase in the coefficient of cooperation causes industry output to first decrease and then increase over time thus making consumers worse off in the short run and better off in the long run this study establishes the conditions under which the long run effects outweigh the short run effects of cooperation leading to an increase in the discounted sum of consumer surplus our analysis suggests that in some cases conservation cartels should be promoted on the basis of not only resource conservation but also efficiency

when additional resource stocks reduce welfare in the dominant firm model we show that an increase of the fringe s reserves of a nonrenewable resource may lead to a decrease in aggregate discounted social welfare this happens when the difference between the fringe s extraction cost and the dominant firm s is positive and large enough we also show that welfare might decrease if the fringe s marginal extraction cost decreases

inventory control with information about supply conditions this paper presents an inventory control model which includes a markovian model of the supply system as that system evolves over time so do the replenishment leadtimes the optimal policy has the same structure as in standard models but its parameters change dynamically to reflect current supply conditions in this setting contrary to conventional wisdom a longer leadtime does not necessarily imply more inventory the leadtime is important but so is a concept we call order coverage

batch quantities when forecasts are improving this paper considers the choice of initial batch quantities when demand forecasts are improving we assume that the standard deviation of the demand per period is decreasing exponentially and approaching a long run value a discrete time stochastic single level inventory model is considered there are traditional holding and backorder costs as well as an ordering cost the ordering periods must be determined in advance and we wish to determine a suitable schedule

myopic policies for some inventory models with uncertain demand distributions the majority of papers on stochastic inventory theory make the assumption that the distribution of consumer demand in each time period is known with certainty while this assumption is unsupported in many applied contexts it is conventionally held that more realistic models are more difficult to solve and will not yield simple operational policies this paper shows that a simple inventory policy based upon a critical fractile can be optimal or near optimal in some inventory models with parameter adaptive demand processes in these some parameter of the demand distribution is not known with certainty and estimates of the parameter are updated in a statistical fashion as demand is observed through time examples include exponentially smoothed forecasts and bayesian updating of parameter estimates bounds on the value loss relative to optimal cost when using the critical fractile policy can be calculated directly from the problem data some numerical examples illustrate the technique

on nonrenewable resource oligopolies the asymmetric case we give a full characterization of the open loop nash equilibrium of a nonrenewable resource game between two types of firms differing in extraction costs we show that i there almost always exists a phase where both types of firms supply simultaneously ii when the high cost mines are exploited by a number of firms that goes to infinity the equilibrium approaches the cartel versus fringe equilibrium with the fringe firms acting as price takers and iii the cheaper resource may not be exhausted first a violation of the herfindahl rule that may be detrimental to social welfare

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

joint pricing procurement control under fluctuating raw material costs abstract we consider a firm that periodically procures raw material units stores them and processes them into finished products upon order arrivals the raw material cost evolves in a markovian fashion whereas the demand process is influenced by both the raw material cost and sales prices charged by the firm the firm controls both the raw material procurement activity and sales price in each period we show the optimality of base stock list price type of policies with the additional raw cost dependence under conditions that are verifiable when the firm engages in price competition with other firms tapping into the same raw material market and when the raw material cost process has time continuity and mean reversion tendencies we identify two monotone patterns in which policy parameters should follow as the raw material cost fluctuates cost increases are also shown to translate into price increases at low inventory levels in other circumstances however there does not appear to be a clear pattern as to how the firm should pass cost increases on to end customers our numerical evidence unequivocally supports the adaptation of procurement and pricing controls to changing raw material costs

untested hypotheses in non renewable resource economics the present paper reviews the literature on the empirical implications of the hotelling rule and suggests directions for further research in this area

aggressive oil extraction and precautionary saving coping with volatility the effects of stochastic oil demand on optimal oil extraction paths and tax spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic without prudence optimal oil extraction is governed by the hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle volatile oil demand brings forward oil extraction and induces a bigger government surplus with prudence the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward especially if it has substantial monopoly power on the oil market gives high priority to the public spending target is very prudent and future oil demand has high variance uncertain economic prospects induce even higher precautionary saving and if non oil revenue shocks and oil revenue shocks are positively correlated even more aggressive oil extraction in contrast prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving but less so if uncertainty about reserves and oil demand are positively correlated

imperfect cartelization in opec a model of global oil production is applied to study cartelization by opec countries we define a measure for the degree of cooperation analogous to the market conduct parameter of cyert et al 1973 geroski et al 1987 lofaro 1999 and symeonidis 2000 this parameter is used to assess the incentives of different opec members to collude we find that heterogeneity in opec and the supplies of the non opec fringe create strong incentives against collusion more specifically opec s supply strategy although observed to be substantially more restrictive than that of a cournot nash oligopoly is found to still be more accommodative than that of a perfect cartel the strategy involves allocating larger than proportionate quotas to smaller and relatively costlier producers as if to bribe their participation in the cartel this is in contrast to predictions of the standard cartel model that such producers should be allocated relatively more stringent quotas furthermore we demonstrate that cartel collusion is more likely to be sustained for elastic than for inelastic demand since global oil demand is well known to be inelastic this observation provides another structural explanation for why opec behavior is inconsistent with that of a perfect cartel our study points to multiple headwinds that limit opec s ability to mark up the oil price 2016 elsevier b v

inventory management with random supply and imperfect information a hidden markov model in most of the papers on inventory models operating in a random environment the state of the environment in each period is assumed to be fully observed with perfect information however this assumption is not realistic in most real life situations and we provide a remedy in this paper by assuming that the environment is only partially observed with imperfect information we accomplish this by analyzing two formulations of single item models with periodic review and random supply in a random environment in the first one supply is random due to random capacity of production and random availability of transportation we show that state dependent base stock policy is optimal if the capacity and all costs are observed while demand and availability are unobserved in the second model we consider a model with random availability only with fixed ordering cost we show that state dependent s s policy is optimal if the availability process is observable