bank competition and ecb s monetary policy in a model of oligopolistic competition in the banking sector we analyse how the monetary policy rule chosen by the central bank can influence the incentive of banks to set high interest rates on loans over the business cycle we exploit the basic model to investigate the potential impact of emu implementation on collusion among banks in particular we consider the possible eaects of the european central bank s policy criteria with regard to the cost of credit in national markets 2000 elsevier science b v all rights reserved

a simple heuristic for joint inventory and pricing models with lead time and backorders we study a joint inventory and pricing problem in a single stage system with a positive lead time we consider both additive and multiplicative demand forms this problem is in general intractable due to its computational complexity we develop a simple heuristic that resolves this issue the heuristic involves a myopic pricing policy that generates each period s price as a function of the initial inventory level and a base stock policy for inventory replenishment in each period the firm monitors its so called price deflated inventory position and places an order to reach a target base stock level the price deflated inventory position weights the on hand and pipeline inventory according to a factor that reflects the sensitivity of price to the net inventory level to assess the effectiveness of our heuristic we construct an upper bound to the exact system the upper bound is based on an information relaxation approach and involves a penalty function derived from the proposed heuristic a numerical s

variations on the theme of conning in mathematical economics abstract the mathematization of economics is almost exclusively in terms of the mathematics of real analysis which in turn is founded on set theory and the axiom of choice and orthodox mathematical logic in this paper i try to point out that this kind of mathematization is replete with economic infelicities the attempt to extract these infelicities is in terms of three main examples and one general discussion dynamics policy and rational expectations and learning are the examples a game theory without subjectivism based on the axiom of determinateness is discussed in general terms the focus is on the role and reliance of standard fixed point theorems in orthodox mathematical economics

coordination of pricing and multi period production for constant priced goods this paper addresses the problem of jointly determining a single price and production schedule for a product with seasonal demand under the assumption that the ratio of the demands in any two periods does not depend upon the price at which the product is offered we develop a procedure that guarantees an optimal solution perhaps more importantly however our model provides insight into the manner in which the firm s production cost increases with the intensity of total demand

optimal product launch times in a duopoly balancing life cycle revenues with product cost we present a model describing the demand dynamics of two new products competing for a limited target market the demand trajectories of the two products are driven by a market saturation effect and an imitation effect reflecting the product experience of previous adopters in this general setting we provide analytical results for the sales trajectories and life cycle sales of the competing products we use these results to study the impact of launch time on overall life cycle sales we consider the perspective of one of the competing products and model the trade off between the lost revenues resulting from a delayed launch and the lower unit production costs we find that the profit maximizing launch time exhibits a counterintuitive behavior in particular we show that a firm facing a launch time delay from a competing product might benefit from accelerating its own product launch as opposed to using the softened competitive situation to further improve its cost position we identify conditions under w

whom can we trust to run the fed theoretical support for the founders views abstract the federal reserve has been called a bizarre policymaking structure this paper documents and formalizes a historical argument that the fed s structure was a response to public conflict over inflation s redistributive powers the paper shows that in the face of conflict over redistributive inflation policy by majority can lead to policy that is worse even for the majority than obvious alternatives in balancing the interests for and against surprise inflation the fed s structure can lead to a better outcome

the unreasonable ineffectiveness of mathematics in economics in this paper i attempt to show that mathematical economics is unreasonably ineffective unreasonable because the mathematical assumptions are economically unwarranted ineffective because the mathematical formalizations imply non constructive and uncomputable structures a reasonable and effective mathematization of economics entails diophantine formalisms these come with natural undecidabilities and uncomputabilites in the face of this i conjecture that an economics for the future will be freer to explore experimental methodologies underpinned by alternative mathematical structures the whole discussion is framed within the context of the celebrated wignerian theme the unreasonable effectiveness of mathematics in the natural sciences

can economic systems be seen as computing devices abstract we briefly discuss ideas about computable economics and comment on the contributions of a a lewis and k v velupillai we then sketch the mathematical background for the tsuji et al tsuji m da costa n c a doria f a 1998 the incompleteness of theories of games journal of philosophical logic 27 553 564 result on the undecidability and incompleteness of game theory and of the theory of competitive markets using that result in the concluding sections of the paper to examine the possible empirical interpretation of economic and social systems as computing devices

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

replenishment and pricing policy for deteriorating items taking into account the time value of money abstract a deteriorating inventory model taking into account the time value of money is developed for a deterministic inventory system with price dependent demand this study applies the discounted cash flows dcf approach for problem analysis a heuristic approach is presented to derive the near optimal replenishment and pricing policy that tries to maximize the total net present value profit a numerical example is implemented to illustrate the theory

effectivity and constructivity in economic theory the implicit nonconstructive and noneffective contents of some aspects of general equilibrium theory are formally investigated in particular the claims of some applied computable general equilibrium cge theorists regarding the constructivity and effectivity of cge models are rigorously analyzed and shown to be unsubstantiated an attempt is also made to extract some general methodological guidelines for the meaningful mathematization of economic theory

pricing competition with inventory considerations in a hazard rate prone market of durables abstract this paper addresses bertrand type pricing competition between two firms producing partially differentiated durables over a finite planning horizon the demand for durables characterized by increasing returns of scale to a price reduction is led by the hazard rate while the effect of inventories on pricing of non durables is widely recognized the management and marketing literature typically overlooks this effect in regard to horizontally competing firms for durables in this paper we show that the pricing trajectory of durables may significantly alter when inventory dynamics are accounted for in particular the price may hike upwards before dropping gradually grow or even stay at the same level over the entire product life while it would only decline if inventories and related costs are disregarded furthermore the well known optimal pricing strategy of following the pattern of sales does not necessarily confirm even for symmetric equilibria when the competing firms have either an inventory surplus or shortage

a dynamic marketing operations interface model of new product updates abstract two critical success factors for nearly any firm are the introduction of new products and the integration of the marketing and operations functions within the business enterprise the series of products being considered are associated with sequential non disruptive innovations in technology but disruptive in fashion the study presents a model that integrates and builds upon the popular dynamic bass model for new product diffusion in marketing and the wagner and whitin dynamic lot sizing model a seminal model in operations management the end result is a model that simultaneously determines the optimal timing for the introduction of new product generations pricing production timing and produced quantities this model is then used to examine the impact of variations in marketing and operations parameters on both optimal profit and optimal product lifecycle length the study finds that larger profit and a faster pace of new product introductions are generally associated with faster diffusion lower price elasticity larger market potential lower new product introduction cost and more costly consumer products

optimal monetary policy in a currency area abstract this paper investigates how monetary policy should be conducted in a two region general equilibrium model with monopolistic competition and price stickiness this framework delivers a simple welfare criterion based on the utility of the consumers that can be used to evaluate monetary policy in a currency area if the two regions share the same degree of nominal rigidity the terms of trade are completely insulated from monetary policy and the optimal outcome is obtained by targeting a weighted average of the regional inflation rates these weights coincide with the economic sizes of the region if the degrees of rigidity are different the optimal plan implies a high degree of inertia in the inflation rate but an inflation targeting policy in which higher weight is given to the inflation in the region with higher degree of nominal rigidity is nearly optimal

one monetary policy and 18 central bankers the european monetary policy as a game of strategic delegation abstract this paper employs a multi country delegation monetary policy model and argues that a decision making mechanism based on the median voter theorem where intensity of preferences cannot play a role does not capture important aspects of policy setting in the european monetary union replacing the median voter mechanism with a less restrictive weighted mean mechanism it is shown that strategic delegation can lead to a surprising degree of central bank inflation aversion this finding supports the the twin sister hypothesis and the perception of the european central bank implementing the policy of the bundesbank rather than a more inflationary monetary policy

games of monetary and fiscal interactions in the emu abstract this paper constructs various models of the emu and ecb when member countries have different objectives voting in pursuit of national interest can yield moderate and stable inflation the metaphor of walsh type contracts implements a monetary policy rule that averages the member countries most preferred rules in a repeated relationship where a country suffering a large adverse shock can use political bargaining to subvert the ecb s commitment the optimal rule should incorporate some flexibility to forestall that finally freedom of national fiscal policies undermines the ecb s monetary commitment this may justify fiscal constraints like the stability and growth pact

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

one size fits all monetary policy and asymmetric household debt cycles in u s states i investigate the nonlinear effects of monetary policy through differences in household debt across u s states after constructing a novel indicator of inflation for the states i compute state specific monetary policy stances as deviations from an aggregate taylor rule i find that the effectiveness of monetary policy is curtailed during periods of large household debt imbalances moreover a common u s monetary policy does not fit all it may have asymmetric effects on the economic performance across states particularly at times of high dispersion in the household debt imbalances as it may have been the case around the great recession

who can adjust to the euro this study estimates potential exchange rate variation among 26 european countries during 1992 1998 as a proxy for the potential magnitude of adjustment they face to euro block membership using the instrumental variable iv method applying least squares cross section regression analysis based on optimal currency area theory a currency union among belgium denmark france germany ireland malta the netherlands and slovenia is found to entail a relatively light burden of adjustment for its members the current membership of other countries in the euro block is potentially very demanding on their societies in the long term this study also compares currency boards and independent central banks as alternative monetary frameworks for disinflation policies based on a pooled time series cross section dataset of the same countries and years currency boards are found to be more effective in reducing inflation in all countries except belgium balancing emu s credibility gains against its adjustment costs finland greece italy portugal and spain seem like unstable members of the euro block for all new eu member states except the czech republic malta slovenia and slovakia the advice is to stay out of the euro block until their economies are liberalised and flexible enough to withstand major adjustments and their societal interest groups supportive enough of these adjustments

the policy choices and reaction functions of bank of england mpc members the results of an econometric exercise are presented showing that monetary policy committee mpc members appointed from outside the ranks of bank of england staff outsiders react differently to forecasts of inflation and output than those appointed from within the bank insiders all results are reinforced by the well established findings that compared with outsiders insiders choose higher interest rates are more likely to vote as a bloc and feature on the winning side of policy decisions more frequently on the basis of these results it is argued that the current mpc framework is biased toward the policy choices of insiders

economic theory in the mathematical mode iif a symbolic date were to be chosen for the birth of mathematical economics our profession in rare unanimous agreement would select 1838 the year in which augustin cournot published his recherches sur les principes mathematiques de la thetorie des richesses students of the history of economic analysis could point out contributions made to mathematical economics as early as the beginning of the eighteenth century they could also point out johann heinrich von thunen s der isolierte staat 1826 a prototypical example of the use of mathematical reasoning in economic theory with little mathematical formalism but cournot stands out as the first great builder of mathematical models explaining economic phenomena among his successors in the nineteenth century and the early twentieth century the highest prominence will be given in this lecture to leon walras 1834 1910 the founder of the mathematical theory of general economic equilibrium to francis y edgeworth 1845 1926 and to vilfredo pareto 1848 1923 all three lived long enough into the twentieth century to have increased for all nobel laureates the value of the economics prize had it like the other prizes been initiated in 1901 if 1838 is the symbolic birthdate of mathematical economics 1944 is the symbolic beginning of its contemporary period in that year john von neumann and oskar morgenstern published the first edition of the theory of games and economic behavior an event that announced a profound and extensive transformation of economic theory in the following decade powerful intellectual stimuli also came from many other directions in addition to von neumann and morgenstern s book wassily leontiefs input output analysis paul samuelson s foundations of economic analysis tjalling koopmans activity analysis of production and george dant

new product strategy and industry clockspeed we study how industry clockspeed internal firm factors such as product development production and inventory costs and competitive factors determine a firm s optimal new product introduction timing and product quality decisions we explicitly model market demand uncertainty a firm s internal cost structure and competition using an infinite horizon markov decision process based on a large scale numerical analysis we find that more frequent new product introductions are optimal under faster clockspeed conditions in addition we find that a firm s optimal product quality decision is governed by a firm s relative costs of introducing new products with incremental versus more substantial improvements we show that a time pacing product introduction strategy results in a production policy with a simple base stock form and performs well relative to the optimal policy our results thus provide analytical support for the managerial belief that industry clockspeed and time to market are closely related

optimal pricing and advertising in a durable good duopoly abstract this paper analyzes dynamic advertising and pricing policies in a durable good duopoly the proposed infinite horizon model while general enough to capture dynamic price and advertising interactions in a competitive setting also permits closed form solutions we use differential game theory to analyze two different demand specifications linear demand and isoelastic demand for symmetric and asymmetric competitors we find that the optimal price is constant and does not vary with cumulative sales while the optimal advertising is decreasing with cumulative sales comparative statics for the results are presented

the reference effects on a retailer s dynamic pricing and inventory strategies with strategic consumers we consider a retailer that sells the same or different versions of the product season after season at the beginning of each season stage 1 the retailer places an order and sells the product at the full price as the sales unfold the retailer has an opportunity to mark down the price stage 2 which creates an incentive for strategic consumers to delay their purchases for price discount however consumers do not know the markdown price exactly when they time their purchases instead they learn from the retailer s past prices and form their estimate of the markdown price called the reference price to decide if they purchase at the full price or wait for the markdown in the current selling season we characterize the properties of the optimal ordering and markdown decisions and show that markdowns if adopted appropriately do not necessarily destroy the stability of a business even in the presence of strategic consumers furthermore the consumers reference exhibits a mean reverting pattern under certain conditions that is the reference fluctuates around a mean value reflecting the practice of most stable businesses we conduct numerical studies to investigate the impact of consumer learning about the reference price and various system parameters on the retailer s optimal strategies and profitability in the presence of strategic consumers

the regional effects of monetary policy a survey of the empirical literature this survey provides an updated review of the empirical literature on the regional effects of monetary policy in economic activity by means of undertaking a threefold perspective first the main methodological dimensions of this literature are examined while pinpointing those modelling or methodological traits that constitute a source of diverging estimates and thereby produce inconclusive evidence secondly the estimates yielded by the literature are summarized by carrying out a cross study analysis of the results for each monetary union by drawing on empirical regularities that are robust across studies the conclusiveness of the results is assessed while those monetary unions for which conclusive evidence is still lacking are also identified lastly the sources of regional heterogeneity identified by these studies are reviewed in order to shed some light on the linkage between monetary policy and territorial heterogeneity as a result of this threefold perspective this survey delivers overall structured conclusions and updated policy relevant lessons moreover various research gaps and emerging topics in the literature are also identified

effect of price on the demand for durables modeling estimation and findings the focus of this article is on the effect of price on the adoption of durables most empirical research on the timing of adoption of new products has centered on the growth without explicitly incorporating any marketing mix variables recently some researchers have pursued ways of enriching the bass model by including such controllable variables as price and advertising our interest in this article is to propose diffusion models that incorporate price we use these models to study the price effect for four durable products we report the estimation results and discuss the insights they provide in particular our empirical results suggest that price influences consumers decisions on whether or not to buy and the diffusion process governs the timing of purchase given the decision to buy moreover we find that the estimated coefficient of imitation in the bass model is understated if price is inappropriately modeled

risk shaping in production planning problem with pricing under random yield abstract in this paper we address a basic production planning problem with price dependent demand and stochastic yield of production we use price and target quantity as decision variables to control the risk of low production yield the value of risk control becomes more important especially for products with short life cycle where high losses are unbearable in the short run in this cases optimization of a solely scalar function of profit is not sufficient to control the risk we apply conditional value at risk cvar measure to model the risk preferences of the producer the producer is interested in shaping the risk by bounding from below the means of tail distributions of profit for different values of the resulting model is nonconvex we propose an efficient solution algorithm and present a sufficient optimality condition

capacitated procurement planning with price sensitive demand and general concave revenue functions this paper develops effective solution methods for discrete time finite horizon procurement planning problems with economies of scale in procurement price sensitive demand and time invariant procurement capacities our models consider general concave revenue functions in each time period and seek to maximize total revenue less procurement and inventory holding costs we consider the case in which prices may vary dynamically as well the important practical case in which a constant price is required during the planning horizon under mild conditions on the revenue function properties we provide polynomial time solution methods for this problem class the structural properties of optimal solutions that lead to efficient solution methods also serve to sharpen intuition regarding optimal demand management strategies in complex planning situations

technical note a note on optimal strategic pricing of technological innovations the experience curve phenomenon of falling marginal costs associated with accumulated output or production experience has given rise to dynamic pricing models optimal pricing policies will depend upon the nature of the dynamic demand and cost functions in this note we shall show that the demand function employed by bass bass f m 1980 the relationship between diffusion rates experience curves and demand elasticities for consumer durable technological innovations j bus 53 july s51 s67 when taken in conjunction with the experience curve cost function leads to a multiperiod pricing strategy which is always less than the myopically optimal price further we present a dynamic programming algorithm for the multiperiod strategy in which we have explored the effects on discounted profits of myopic pricing versus multiperiod pricing the results of this comparison may to some be somewhat surprising and may have managerial significance

do asymmetries matter for european monetary policy in this paper we analyze the impact of economic and institutional ecb decision rules asymmetries on the effectiveness of monetary policy in euroland we consider a model where asymmetric shocks and divergent propagation of shocks in output and inflation are potential causes of tensions within the ecb concerning the conduct of common monetary interest rate policy welfare implications of the alternative decision procedures are discussed

the regional representation of federal reserve bank presidents recent litigation has questioned the constitutionality of having federal reserve bank presidents serve on the federal open market committee inherent but undocumented in these lawsuits is the belief that district bank presidents vote differently than federal reserve governors at federal open market committee meetings this paper analyzes the voting behavior of federal reserve bank presidents and uncovers a regional bias in their monetary policy preferences presidents representing regions with higher unemployment rates or with larger percentages of democratic voters tend to vote for more expansionary monetary policy this study provides yet another clue to the monetary policymaking behavior of federal reserve officials copyright 1992 by ohio state university press

monetary policy through the credit cost channel italy and germany pre and post emu we present an empirical analysis of the credit cost channel ccc of monetary policy transmission this channel combines bank credit supply and interest rates on loans as a cost to firms the thrust of the ccc is that it makes both aggregate demand and aggregate supply dependent on monetary policy as a consequence 1 credit market conditions e g risk spreads are important sources and indicators of macroeconomic shocks 2 the real effects of monetary policy are larger and persistent we have applied the cointegrated vector autoregression cvar econometric methodology to italy and germany in the hard ems period and in the european monetary union emu period the short run and long run effects of the ccc are detectable for both countries in both periods simulation of the estimated model also confirms that inflation targeting by way of inter bank rate control stabilizes inflation through structural shifts of the stochastic equilibrium paths of both inflation and the output

licensing radical product innovations to speed up the diffusion abstract we present a differential game to study how companies can simultaneously license their innovations to other firms when launching a new product the licensee may cannibalize licensor s sales albeit this can be compensated by gains from royalties nonetheless patent royalties are generally so low that licensing is not an attractive strategy in this paper we consider the role of licensing to speed up the product diffusion word of mouth by licensee s customers and licensee s advertising indirectly push forward sales of the licensing company accelerating new product diffusion we find evidence that licensing can be a potentially profitable strategy however we also find that a weak intellectual property right ipr protection can easily diminish the financial attractiveness of licensing

social learning and dynamic pricing of durable goods we analyze the impacts of social learning sl on the dynamic pricing and consumer adoption of durable goods in a two period monopoly consumers can make either early uninformed purchases or late but potentially informed purchases as a result of social learning several results are derived first we identify the market conditions under which ex ante homogeneous consumers may choose to purchase at different times second equilibrium adoption may demonstrate inertia where all adopt late or frenzy where all adopt early in particular adoption inertia appears when sl intensity is reasonably high but may vanish when sl intensity exceeds a certain threshold third firm profits and social welfare first weakly decrease in sl intensity and may then jump up by a lump sum amount at the threshold sl intensity level mentioned above last we show that the firm potentially benefits from informative advertising or investing to cultivate more social learning

integration of speed economics into decision making for manufacturing management abstract decision methodologies for manufacturing management typically use cost as the sole or primary criterion of merit in this article we impute economic value for the speed of manufacturing deployment and execution thereby enabling the value of speed to be properly weighed against costs to illustrate we consider semiconductor industry data selling prices of major products have been declining at stable rates for many years we show that to good approximation these rates of price decline are insensitive to speed improvements achieved at individual factories and therefore it is relatively straightforward to calculate the revenue gains resulting from local speed improvements we embed these calculations in a delay cost model that we propose as a practical engineering tool to quantitatively assess revenue gains resulting from increased speed of engineering and manufacturing execution

a diffusion model incorporating product benefits price income and information we start by assuming that a major benefit of many new durable products such as dishwashers and microwave ovens is time savings others such as vcrs also enhance the value of our leisure time using a household production framework we demonstrate that a utility maximizing individual will have a reservation price for the product which is a function of the product benefits and his wage rate by assuming that the wage rate has an extreme value distribution across the population we are able to derive for the aggregate process an income price dependent logistic adoption equation we then allow for the possibility that certain eligible consumers may delay their purchase of the product because they are unaware that it exists are suspicious of its quality or expect its price to fall unawareness uncertainty and hope for further price declines are assumed to decrease with the increase in the number of previous adopters the resulting diffusion model has the property that the product life cycle phenomenon can be explained jointly or separately by the income price process and the awareness uncertainty expectations process using data on household income on durable penetration within different income classes and on first purchase sales the aggregate diffusion model and its premises are tested and supported it is found that both the income price and awareness uncertainty expectations processes are at work however the dependence of the awareness uncertainty expectations delay process on the number of previous adopters e g word of mouth type effect exists only in certain product categories and is usually relatively weak it is demonstrated that if the word of mouth type effects are weak a price skimming strategy is optimal for a monopolist and also is likely to be implemented by oligopolists the sales forecasting implications of the model also are pursued

reliable and unreliable partisan appointees to the board of governors every new appointment to the board of governors in recent years has triggered speculation as to how the new governor will vote in fomc meetings while several studies have hinted at partisan voting behavior by governors no study has yet attempted to identify reliable and unreliable partisan voting behavior and to pinpoint the background characteristics of governors that distinguish between the two this paper indicates that board members with a background in economics consistently voted in line with the economic ideology of the appointing president noneconomists on the board however displayed no such partisan voting behavior and were seen to be influenced by pressures emanating from the administration and by the monetary environment prior to their appointment over the 1951 to 1987 period most presidents have appointed reliable governors earlier in their presidential terms when the returns from being able to influence subsequent monetary policy are great and have chosen unreliable governors later in their terms when election support from the interest groups that these unreliables represent is important the results of the present paper suggest skepticism toward the recent spate of rational expectations game theoretic models which feature a dictatorial policy maker gaming atomistic market participants whose only political activity voting generates monetary surprises followed by convergence to an equilibrium because of their obsession with the ceremonial formalism of their genre these models ignore a vast complementary literature and as a consequence display conspicuously flimsy institutional and historical premises instead the present paper argues for the greater relevance of models of uncoordinated interaction between multiple political and private principals and federal reserve agents

a piecewise diffusion model of new product demands the bass model bm is a widely used framework in marketing for the study of new product sales growth its usefulness as a demand model has also been recognized in production inventory and capacity planning settings the bm postulates that the cumulative number of adopters of a new product in a large population approximately follows a deterministic trajectory whose growth rate is governed by two parameters that capture i an individual consumer s intrinsic interest in the product and ii a positive force of influence on other consumers from existing adopters a finite population purebirth process re formulation of the bm called the stochastic bass model sbm was proposed recently by the author in a previous paper and it was shown that if the size of the population in the sbm is taken to infinity then the sbm and the bm agree in probability in the limit thus the sbm expands the bm in the sense that for any given population size it is a well defined model in this paper we exploit this expansion and introduce a further extension of the sbm in which demands of a product in successive time periods are governed by a history dependent family of sbms one for each period with different population sizes a sampling theory for this extension which we call the piecewise diffusion model pdm is also developed we then apply the theory to a typical product example demonstrating that the pdm is a remarkably accurate and versatile framework that allows us to better understand the underlying dynamics of new product demands over time joint movement of price and advertising levels in particular is shown to have a significant influence on whether or not consumers are ready to participate in product purchase subject classifications marketing new products buyer behavior pricing probability diffusion inventory production stochastic nonstationary demand area of review manufacturing service and supply chain operations history received august 2003 revision received september 2004 accepted july 2005

empirical evidence on the strength of the monetary transmission mechanism in canada an aggregate approach abstract this paper examines the transmission of monetary policy in canada it emphasizes the transmission through interest rates and the exchange rate rather than through changes in monetary aggregates and provides empirical evidence on the strength of these channels using a highly aggregated structural model implications of these structural equations for the dynamic effects of monetary policy are explored through a simulation analysis

industrial pricing theory and managerial practice we organize the existing theoretical pricing research into a new two level framework for industrial goods pricing the first level consists of four pricing situations new product competitive product line and cost based the second level consists of the pricing strategies appropriate for a given situation for example within the new product pricing situation there are three alternative pricing strategies skim penetration and experience curve pricing there are a total of ten pricing strategies included in the framework we then identified a set of cost product market and information conditions which determine what pricing situation s a firm is facing as well as which strategies are appropriate within a given situation some of these determinant conditions are common to many pricing strategies e g highly elastic demand while others are unique to a given strategy within a particular pricing situation for example within the product line situation the profitability of supplementary sales is a unique determinant of the complementary product pricing strategy razor and blade pricing using this framework as a basis for an empirical study we examined how well current industrial pricing practice matches the prescriptions from the existing research our sample consisted of 270 respondents 27 response rate of these more than 50 indicated that they used more than one pricing strategy in formulating their most recent pricing decision for a high value industrial product sold in the united states as in previous research cost plus pricing was the most often cited pricing strategy 56 of the respondents since the respondents were able to indicate their use of more than one pricing strategy the data are of the pick k from n variety in order to model the managers pricing strategy choices we constructed a stacked binary logit with a separate observation for each strategy within a given pricing situation the signs of the determinant variables were estimated as interaction terms the new product pricing strategies skim penetration experience curve were used for new models in the market skim pricing was used in markets with high levels of product differentiation by firms at a cost disadvantage due to scale penetration pricing was used by firms with a cost advantage due to scale in markets with high level of overall elasticity but low brand elasticity experience curve pricing was used for minor innovations by firms with low capacity utilization in markets with a high level of differentiation the competitive pricing strategies leader parity and low price supplier were used in mature markets parity pricing was used by firms in a poor competitive situation i e high costs low market share low product differentiation these firms were also unable to take advantage of high levels of elasticity since their capacity utilization was high in contrast the low price supplier strategy was used by firmswith low costs due to scale advantages since they have low utilization these firms can take advantage of elastic brand demand none of the determinants were significantly related to the choice of leader pricing product line pricing strategies bundling complementary product and customer value pricing were more likely to be used by firms which sell substitute or complementary products bundle pricing was used for per sale contract pricing in markets with high levels of brand elasticity complementary product pricing razor and blade was used by firms that enjoyed high profitability on its supplementary sales using customer value pricing a firm offers a stripped down version of its current products to appeal to more price sensitive segments or to leverage new distribution channels this strategy was used to target a narrow segment in high growth markets where price changes are difficult to detect cost based pricing was more likely to be used in marketswhere demand is very difficult to estimate in such a situation cost based pricing makes a great deal of sense in general the results show that the managers pricing strategy choices are consistent with normative pricing research however questions about how managers combine their strategies to arrive at a final price as well as the organizational influences on pricing strategies remain important areas for future research

the complexity of exchange the computational complexity of two classes of market mechanisms is compared first the walrasian interpretation in which prices are centrally computed by an auctioneer recent results on the computational complexity are reviewed the non polynomial complexity of these algorithms makes walrasian general equilibrium an implausible conception second a decentralised picture of market processes is described involving concurrent exchange within transient coalitions of agents these processes feature price dispersion yield allocations that are not in the core modify the distribution of wealth are always stable but path dependent replacing the walrasian framing of markets requires substantial revision of conventional wisdom concerning markets

efficient feed in tariff policies for renewable energy technologies feed in tariff fit policies aim at driving down the cost of renewable energy by fostering learning and accelerating the diffusion of green technologies under fit mechanisms governments purchase green energy at tariffs that are set above market price the success or failure of fit policies in turn critically depend on how these tariffs are determined and adjusted over time this paper provides insights into designing cost efficient and socially optimal fit programs our modeling framework captures key market dynamics as well as investors strategic behavior in this framework we establish that the current practice of maintaining constant profitability is theoretically rarely optimal by contrast we characterize a no delay region in the problem s parameters such that profitability should strictly decrease over time if the diffusion and learning rates belong to this region in this case investors never strategically postpone their investment to a later period when the diffusion and learning rates

the optimal pace of product updates some firms e g intel and medtronics use a time pacing strategy for product development pd introducing new generations at regular intervals if the firm adopts a fast pace introducing frequently it prematurely cannibalizes its old generation incurring high development costs while if it has a slow pace it fails to capitalize on customer willingness to pay for improved technology we develop a model to gain insight into which factors drive the pace we consider pd cost the diffusion rate coefficients of innovation and imitation the rate of margin decline and the degree to which a new generation stimulates market growth we find that a faster pace is generally associated with faster diffusion a higher market growth rate and faster margin decay not so intuitively we find that relatively minor differences in the development cost function can significantly impact the pace

optimal pricing strategy for new products robinson and lakhani 1975 initiated a long research stream in marketing when they used the bass model 1969 to develop optimal pricing path for a new product a careful analysis of the extant literature reveals that the research predominantly suggests that the optimal price path should be largely based on the sales growth pattern however in the real world we rarely find new products that have such pricing pattern we observe either a monotonically declining pricing pattern or an increase decrease pricing pattern that does not seem close to the sales path in this paper we use a variation of the generalized bass model called gbm developed by bass et al 1994 that yields optimal pricing policies that are consistent with empirical data

price stickiness and the contractionary effect of technology shocks abstract we derive a measure of technological change from a dynamic cost minimization model that controls for imperfect competition increasing returns and unobserved factor utilization we estimate this measure using highly detailed panel data of a representative sample of italian manufacturing firms for the period 1984 1997 our key finding is that technological improvements result in a contraction of labor input on impact in principle this result can be reconciled with the transmission mechanism of flexible price models by resorting to reorganization and reallocation effects on the other hand however it is consistent with the predictions of a sticky price model using survey information on the frequency of price revisions we corroborate the latter interpretation by showing that the contractionary effect of technology shocks is much stronger for firms with stickier prices

pricing information goods a strategic analysis of the selling and pay per use mechanisms we analyze two pricing mechanisms for information goods these mechanisms are selling where up front payment allows unrestricted use and pay per use where payments are tailored to use we analytically model a market where consumers differ in use frequency and where use on a pay per use basis invokes a psychological cost associated with the well known ticking meter effect we demonstrate that pay per use yields higher profits in a monopoly provided the associated psychological cost is low in a duopoly one firm uses selling and the other uses pay per use here in contrast to the monopoly selling yields higher profits than pay per use we demonstrate that surprisingly the profits of both duopolists can increase as the psychological cost associated with pay per use increases next we show that uncertainty in consumer use frequency does not affect pay per use in a monopoly but lowers profits from selling in a duopoly both the seller and the pay per use provider obtain lower profits when use frequency is uncertain we also analyze how pricing mechanism performance is affected if the firms cannot commit to prices if the pay per use provider offers a two part tariff and if consumers are risk averse

the robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the european central bank abstract this paper examines the implications of recent research on monetary policy rules for practical monetary policy making with special emphasis on strategies for setting interest rates by the european central bank ecb the paper draws on recent research and new simulations of a large open economy model to assess the efficiency of a simple benchmark rule in comparison with other proposed rules further it stresses new results on the robustness of monetary policy rules in which each rule that is optimal or good according to one model or researcher is tested for robustness by other researchers using different models because of the large increase in the number of economists focussing on econometric evaluation of monetary policy rules for the interest rate instrument and because of the parallel increase in the variety of models being developed for this purpose much more evidence is becoming available on the robustness of simple monetary policy rules for the interest rate than ever before

the immediate challenges for the european central bank immediate challenges for the ecb issues in formulating a single monetary policy this paper discusses a number of issues that the newly constituted board of the ecb will face early on conducting a european monetary policy will be very different from living under the protective umbrella of the bundesbank we discuss voting on the ecb board and argue that the ability to communicate with the public will be critical for the success of the new institution we also ask how a single monetary policy a common change in the interest rate controlled by the ecb is transmitted to the economy of each member country we show that the monetary process differs significantly inside emu initially at least the cost of a disinflation episode could fall disproportionately on a few member countries those with both a financial structure that spreads a monetary contraction widely and a wage price structure that is relatively inflexible this process moreover is sure to evolve in part as a result of financial industry restructuring already under way but in part accentuated by the common money furthermore as the lucas principle suggests the wage price process itself will adapt to the changing focus of european monetary policy rudi dornbusch carlo favero and francesco giavazzi

forecasting ecb monetary policy accuracy is a matter of geography abstract monetary policy in the euro area is conducted within a multi country multi cultural and multi lingual context how does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the european central bank ecb using a database of surveys of professional ecb policy forecasters in 24 countries we find remarkable differences in forecast accuracy and show that these have important repercussions on market behaviour explaining the differences in forecast accuracy we provide evidence that they are partly related to geography and clustering around informational hubs as well as to country specific economic conditions in large part this heterogeneity can be traced to differences in forecasting models

dynamic lot sizing models with pricing for new products while previous dynamic lot sizing dls models mainly consider mature products this study analyzes production planning decisions for new products the demand dynamics caused by new product diffusion complicate production decisions for new products we integrate dls and discrete bass models to provide optimal decisions for pricing and production planning problems moreover we study the joint influence of product diffusion and pricing parameters on the dls decisions this leads to the following insights first coordinated production pricing and dynamic pricing improve profitability second the optimal pricing strategy is affected by market conditions the penetration pricing strategy outperforms the skimming pricing strategy when consumers are less sensitive to relative price changes than to the introductory price when the product diffuses slowly or when the consumer initiative level is low otherwise the latter outperforms the former finally pricing strategies and product diffusion patterns reshape the cost structure of a firm coordinated decisions and dynamic pricing strategy substantially reduce the cost revenue ratio whereas an increase in the consumer initiative level or product diffusion speed can improve cost efficiency

financial markets intermediaries and intertemporal smoothing in an overlapping generations economy with incomplete financial markets but no intermediaries there is underinvestment in safe assets in an economy with intermediaries and no financial markets accumulating reserves of safe assets allows returns to be smoothed nondiversifiable risk to be eliminated and an ex ante pareto improvement compared to the allocation in the market equilibrium to be achieved in a mixed financial system however competition from financial markets constrains intermediaries so that they perform no better than markets alone

measuring marketing mix effects in the 32 64 bit video game console market we investigate the short and long run effects of prices and software availability on the category level diffusion of 32 64 bit video game consoles in the usa we adopt an estimation framework that allows for a flexible intrinsic growth pattern for the hardware consoles and uses instrumental variables to control for the potential endogeneity of prices we find significant long term effects of prices and software availability on sales we find that using a non parametric hazard specification is important imposing parametric forms results in elasticities that are up to 30 smaller we use these results to derive implications for marketing policies over the life cycle of the industry copyright 2009 john wiley sons ltd

the assessment macroeconomic policy after emu in this paper we discuss the emergence of the new european macroeconomic structure within emu we focus on three important elements the wage fixing authorities in each country the fiscal authorities in each country and the single european central bank ecb we identify serious problems which might arise in coordinating both the wage setters and the fiscal authorities and argue that these problems could be exacerbated if the ecb conducts monetary policy inappropriately in the light of this we provide recommendations for the conduct of monetary policy by the ecb the paper also briefly discusses financial stability issues and the interaction between the countries in emu and the rest of the world copyright 1998 by oxford university press

monetary policy effects new evidence from the italian flow of funds new evidence on the transmission of monetary policy to the economy is provided through an analysis of the effects of a restrictive monetary policy shock on italian flow of funds over the period 1980 to 2002 firms reduce issuance of debt and decrease the acquisition of financial assets providing no support for the existence of strong financial frictions following the shock in the first quarter households increase short tem liabilities and diminish the acquisition of liquid assets and shares the public sector increases net borrowing during the first 2 years financial corporations decrease their borrowing for three quarters while in the same period the foreign sector increases borrowed funds we claim that our results shed new light on the role of the financial decisions of the economic sectors in the transmission mechanism of monetary policy

asymmetric monetary policy effects in emu this paper develops a semi structural modelling approach to study asymmetric monetary transmission in europe a system of dynamic equations containing reaction functions for monetary policy as well as output gap and inflation equations is simultaneously estimated for france germany and italy we find asymmetries on the demand side in the strength of interest rate transmission and on the supply side in the effects of the output gap on inflation the responses are similar in germany and italy and generally stronger than in france out of sample tests do not find a structural break in the transmission mechanisms prior to the establishment of the european monetary union

pricing and manufacturing decisions when demand is a function of prices in multiple periods in most deterministic manufacturing decision models demand is either known or induced by pricing decisions in the period that the demand is experienced however in more realistic market scenarios consumers make purchase decisions with respect to price not only in the current period but also in past and future periods we model a joint manufacturing pricing decision problem accounting for that portion of demand realized in each period that is induced by the interaction of pricing decisions in the current period and in previous periods we formulate a mathematical programming model and develop solution techniques we identify structural properties of our models and develop closed form solutions and effective heuristics for various special cases of our models finally we conduct extensive computational experiments to quantify the effectiveness of our heuristics and to develop managerial insights

monetary policy in the media just like private companies depend crucially on their ability to reach customers policymakers must communicate with private agents to be successful and much of this communication is channeled through the media this is especially true for central banks which need to build credibility among the general public this paper analyses how favorably the print media report about the european central bank s ecb monetary policy decisions favorableness is inter alia influenced by the amount of information communicated by the ecb there are however also indications of a critical monitoring role of the media which reports more negatively when inflation exceeds the inflation target

the cross country impact of ecb policies asymmetries in asymmetries out abstract since its inception the adequacy of the eurozone to be an optimal currency area has been questioned and along with it the homogeneous transmission and impact of the monetary impulses across the member countries we provide a comprehensive assessment of the transmission mechanism s functioning its symmetry impact on target variables and evolution addressing all the questions which have remained unanswered in the previous literature while adding evidence on the impact of non standard policy measures we do so by adopting a bayesian time varying parameters favar model that fixes the flaws present in past research the empirical analysis shows that the occurrence of the two crises significantly altered policy transmission with both the interest rate and credit channel being consistently affected it also shows that while they provided effective stimuli to the economies the unconventional measures implemented were not able to fix those asymmetries policy wise our findings suggest that authorities must push towards consistent innovation on the fiscal side while gaining more confidence with regards to the new monetary toolkit

the computational experiment an econometric tool an economic experiment consists of the act of placing people in an environment desired by the experimenter who then records the time paths of their economic behavior performing experiments that use actual people at the level of national economies is obviously not practical but constructing a model economy and computing the economic behavior of the model s people is such experiments are termed computational this essay specifies the steps in designing a computational experiment to address some well posed quantitative question the authors emphasize that the computational experiment is an econometric tool used in the task of deriving the quantitative implications of theory

dynamic version of the economic lot size model this article originally appeared in management science october 1958 volume 5 number 1 pp 89 96 published by the institute of management sciences a forward algorithm for a solution to the following dynamic version of the economic lot size model is given allowing the possibility of demands for a single item inventory holding charges and setup costs to vary over n periods we desire a minimum total cost inventory management scheme which satisfies known demand in every period disjoint planning horizons are shown to be possible which eliminate the necessity of having data for the full n periods

european financial market dependence an industry analysis this paper uses a copula model to investigate the degree and determinants of european market dependence across 10 industries in 12 euro zone and 8 non euro zone stock markets during the period 1992 2011 most of the industries in euro countries show a dependence increase with the euro area after the introduction of the euro the effects are strongest in countries with larger market capitalization and in the financials industrials consumer goods utilities technology and telecommunications industries overall the export intensity interest rate sensitivity and competitiveness of an industry and the financial development and economic openness of a country are the most important determinants of changes in equity market dependence the period around the lehman collapse also shows higher equity market dependence between european countries while the lower dependence increase during the period of the recent european sovereign debt crisis suggests that country specific factors may matter more than before

skimming or penetration strategic dynamic pricing for new products current complex dynamic markets are characterized by numerous brands each with multiple products and price points and differentiated on a variety of product attributes plus a large number of new product introductions this study seeks to analyze dynamic pricing paths in a highly complex branded market consisting of 663 products under 79 brand names of digital cameras the authors develop a method to classify dynamic pricing strategies and analyze the choice and correlates of observed pricing paths in the introduction and early growth phase of this market the authors find that despite numerous recommendations in the literature for skimming or penetration pricing market pricing dominates in practice in particular the authors find five patterns skimming 20 frequency penetration 20 frequency and three variants of market pricing patterns 60 frequency where new products are launched at market prices skimming pricing launches the new product 16 above the market price and subsequently increases the price relative to the market price penetration pricing launches the new product 18 below the market price and subsequently lowers the price relative to the market price firms exhibit a mix of these pricing paths across their portfolios the specific pricing paths correlate with market firm and brand characteristics such as competitive intensity market pioneering brand reputation and experience effects the authors discuss managerial implications

central bank independence centralization of wage bargaining inflation and unemployment theory and some evidence abstract this paper proposes a conceptual framework to investigate the effects of central bank independence of the degree of centralization of wage bargaining and of the interaction between those institutional variables on real wages unemployment and inflation in a framework in which unions are averse to inflation this aversion moderates union s wage demands as they attempt to induce the central bank to inflate at a lower rate an increase in the degree of centralization of wage bargaining a decrease in the number of unions triggers two opposite effects on real wages unemployment and inflation it reduces the substitutability between the labor of different unions and therefore the degree of effective competition between them this reduced competition effect raises real wages unemployment and inflation but the decrease in the number of unions also strengthens the moderating effect of inflationary fears on the real wage demands of each union this strategic effect lowers real wages unemployment and inflation for sufficiently inflation averse unions the interaction between those two effects produces a calmfors driffill type relation between real wages and centralization the paper analyzes the effects of central bank independence on the position and the shape of this relation as well as on inflation and unemployment the paper features two mechanisms one of which is novel through which monetary institutions have real effects the model implies that if there is a single union social welfare is maximized when the central bank attaches a zero weight to inflation but when the number of unions is larger than one this result is no longer true in general empirical evaluation of some of the theoretical implications using data from 19 developed economies is for the most part supportive of those implications

new product diffusion decisions under supply constraints two recent papers on managing new product diffusion decisions under production constraints reach somewhat contradictory conclusions ho et al ho t h s savin c terwiesch 2002 managing demand and sales dynamics in new product diffusion under supply constraint management sci 48 2 187 206 show that it is never optimal to refuse to satisfy any customers when the firm has inventory of the product on the other hand in a very similar model kumar and swaminathan kumar s j m swaminathan 2003 diffusion of innovations under supply constraints oper res 51 6 866 879 show that production constraints may in fact lead a firm to reject customers orders even when the firm has the inventory to satisfy them to slow down new product diffusion we provide a counterexample to the results of ho et al 2002 and show that in their and kumar and swaminathan s 2003 models it may be optimal to deny customers a product in inventory we provide a generalization of both models that includes the ability to dynamically price the product and also allows capacity and production costs to vary over time we show that the unintuitive but optimal behavior of denying customers products that are in inventory disappears when the firm can dynamically set prices this paper was accepted by candace a yano operations and supply chain management

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines