different paths to free trade the gains from regionalism we compare free trade reached through expanding regional trading blocs to free trade accomplished by multilateral negotiation with sunk costs the outcomes are different trade in an imperfectly competitive good flows disproportionately more between the original members of a regional agreement even after free trade is reached they secure a higher welfare level from regionalism than from free trade achieved multilaterally nonmembers however reach a lower welfare level a surprising result is that world welfare during free trade is greater when it is achieved by the regional path we conclude with some empirical evidence from the european union that is consistent with the model

economic determinants of free trade agreements abstract the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of the formation of free trade agreements ftas and of the likelihood of ftas between pairs of countries using a qualitative choice model we develop this econometric model based upon a general equilibrium model of world trade with two factors of production two monopolistically competitive product markets and explicit intercontinental and intracontinental transportation costs among multiple countries on multiple continents the empirical model correctly predicts based solely upon economic characteristics 85 of the 286 ftas existing in 1996 among 1431 pairs of countries and 97 of the remaining 1145 pairs with no ftas

what determines bits abstract similar to bilateral or regional preferential trade agreements ptas bilateral investment treaties bits have proliferated over the past 50 years the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of bits and of the likelihood of bits between pairs of countries using a qualitative choice model in a manner consistent with explaining ptas we develop the econometric specification for explaining the two based upon a general equilibrium model of world trade and foreign direct investment with three factors two products and trade and investment costs among multiple countries in the presence of national and multinational firms the empirical model for bits and ptas is bivariate in nature and supports a set of hypotheses drawn from the general equilibrium model using the preferred empirical model for a sample of 12 880 country pairs in the year 2000 we predict correctly 88 of all pairs with a bit and a pta 81 with a bit but no pta and 84 with a pta but no bit

kick starting diffusion explaining the varying frequency of preferential trade agreements environmental provisions by their initial conditions most recent preferential trade agreements ptas include environmental provisions while a number of these environmental provisions remain rare and are incorporated in just a few ptas others are widely popular and are duplicated in more than 100 ptas we still lack a convincing explanation for this varying frequency while the diffusion literature typically tries to explain how diffusion occurs we investigate why certain provisions diffuse more often than others we hypothesise that the initial conditions under which provisions first emerge determine the scope of their diffusion our results support this hypothesis and indicate that provisions originating from intercontinental agreements diffuse more often than others at the same time provisions first designed by economically powerful or environmentally credible countries are not related to more frequent occurrences of diffusion these findings are of interest for the literatures on international institutions design interaction and diffusion

computing the non stationary replenishment cycle inventory policy under stochastic supplier lead times in this paper we address the general multi period production inventory problem with non stationary stochastic demand and supplier lead time under service level constraints a replenishment cycle policy r n s n is modeled where r n is the n th replenishment cycle length and s n is the respective order up to level we propose a stochastic constraint programming approach for computing the optimal policy parameters in order to do so a dedicated global chance constraint and the respective filtering algorithm that enforce the required service level are presented our numerical examples show that a stochastic supplier lead time significantly affects the structure of the optimal policy with respect to the case in which the lead time is assumed to be deterministic or absent

an milp approximation for ordering perishable products with non stationary demand and service level constraints abstract we study the practical production planning problem of a food producer facing a non stationary erratic demand for a perishable product with a fixed life time in meeting the uncertain demand the food producer uses a fifo issuing policy the food producer aims at meeting a certain service level at lowest cost every production run a setup cost is incurred moreover the producer has to deal with unit production cost unit holding cost and unit cost of waste the production plan for a finite time horizon specifies in which periods to produce and how much we formulate this single item single echelon production planning problem as a stochastic programming model with a chance constraint we show that an approximate solution can be provided by an milp model the generated plan simultaneously specifies the periods to produce and the corresponding order up to levels the order up to level for each period is corrected for the expected waste by explicitly considering for every period the expected age distribution of the products in stock the model assumes zero lead time and backlogging of shortages the viability of the approach is illustrated by numerical experiments simulation shows that in 96 4 of the periods the service level requirements are met with an error tolerance of 1

power sector reform and co2 abatement costs in korea abstract the current korean administration is driving change in the power sector by gradually phasing out nuclear power plants expanding the use of renewable energy and imposing restrictions on the operation of coal power plants considering these changes the marginal abatement cost mac curve would provide crucial information to determine an appropriate greenhouse gas reduction target especially for 2030 this study derives the mac curves for the korean power sector in 2030 using a bottom up optimization model with three scenarios based on different carbon pricing schedules in addition the carbon price required to achieve the co2 emission targets in the korean power sector in 2030 are estimated the results show that a carbon price of 135 157 us tco2 would be required to achieve the 2030 emission target for the power sector by comparing the mac curves of three different scenarios we can reiterate the fact that early action regarding climate change mitigation is more effective and efficient than delayed action

international migration and trade agreements the new role of ptas this paper provides an empirical analysis of the relationship between preferential trade agreements ptas and bilateral migration flows building on the empirical literature on the determinants of migration flows i estimate a modified gravity model to assess the role of ptas and their content on bilateral migration flows using a sample of 29 oecd destination countries over the period 1998 2008 i show a strong positive effect of ptas on bilateral migration flows i find that the content of ptas also matters when visa and asylum and labour market related provisions are included in ptas this further stimulates bilateral migration flows different estimation strategies including instrumental variables are employed to address the potential endogeneity bias problems related to ptas and their content

deep integration and production networks an empirical analysis this paper investigates the two way relationship between deep integration and production networks trade we capture deep integration with a set of indices constructed in terms of policy areas covered in preferential trade agreements we estimate an augmented gravity equation to investigate the impact of deep integration on production networks trade the results show that on average signing deeper agreements increases production networks trade between member countries by almost 12 percentage points in addition the impact of deep integration is higher for trade in automobile parts and information and technology products compared with textile products to analyse whether higher levels of network trade increase the likelihood of signing deeper agreements we follow the literature on the determinants of preferential trade agreements the estimation results show that after taking into account other pta determinants a ten percentage increase in the share of production network trade over total trade increases the depth of an agreement by approximately 6 percentage points in addition the probability of signing deeper agreements is higher for country pairs involved in north south production sharing and for countries belonging to the asia region

dynamic uncapacitated lot sizing with random demand under a fillrate constraint abstract this paper deals with the single item dynamic uncapacitated lot sizing problem with random demand we propose a model based on the static uncertainty strategy of bookbinder and tan 1988 in contrast to these authors we use exact expressions for the inventory costs and we apply a fillrate constraint we present an exact solution method and modify several well known dynamic lot sizing heuristics such that they can be applied for the case of dynamic stochastic demands a numerical experiment shows that there are significant differences in the performance of the heuristics whereat the ranking of the heuristics is different from that reported for the case of deterministic demand

a simple approach for assessing the cost of system nervousness abstract a well known problem in coordinating supply chain inventories is that replenishment decisions are revised due to stochastic demands this issue is often referred to as system nervousness the literature distinguishes between two types of nervousness setup oriented and quantity oriented it is widely accepted that cost of nervousness is difficult to measure we argue that this cost can be evaluated by means of three well established inventory control strategies static uncertainty dynamic uncertainty and static dynamic uncertainty these strategies reflect extreme cases with regard to the setup and the quantity oriented nervousness and provide a simple yet an objective measure to assess the cost of system nervousness our results are of practical importance we highlight that the setup oriented nervousness which is considered to be the most critical in practice can be eliminated with a minor cost penalty this is however not the case for the quantity oriented nervousness

what are the key drivers of mac curves a partial equilibrium modelling approach for the uk marginal abatement cost mac curves are widely used for the assessment of costs related to co2 emissions reduction in environmental economics as well as domestic and international climate policy several meta analyses and model comparisons have previously been performed that aim to identify the causes for the wide range of mac curves most of these concentrate on general equilibrium models with a focus on aspects such as specific model type and technology learning while other important aspects remain almost unconsidered including the availability of abatement technologies and level of discount rates this paper addresses the influence of several key parameters on mac curves for the united kingdom and the year 2030 a technology rich energy system model uk markal is used to derive the mac curves the results of this study show that mac curves are robust even to extreme fossil fuel price changes while uncertainty around the choice of the discount rate the availability of key abatement technologies and the demand level were singled out as the most important influencing factors by using a different model type and studying a wider range of influencing factors this paper contributes to the debate on the sensitivity of mac curves

augmenting the lot sizing order quantity when demand is probabilistic abstract in this paper we consider a single item discrete time lot sizing situation where demand is random and its parameters e g mean and standard deviation can change with time for the appealing criterion of minimizing expected total relevant costs per unit time until the moment of the next replenishment we develop two heuristic ways of selecting an appropriate augmentation quantity beyond the expected total demand through to the planned deterministic time of the next replenishment the results of a set of numerical experiments show that augmentation is important particularly when orders occur frequently i e the fixed cost of a replenishment is low relative to the costs of carrying one period of demand in stock and the coefficient of variability of demand is relatively low but also under other specified circumstances the heuristic procedures are also shown to perform very favourably against a hindsight baseline s s policy especially for larger levels of non stationarity

pollution from the electric power sector in japan and efficient pollution reduction abstract under the scheme of the kyoto protocol there are plans for the efficient reduction of carbon dioxide emissions in the electric power sector nuclear power generation which emits no carbon dioxide in the process of generating electricity has come under scrutiny however this energy produces a new environmental issue the disposal of radioactive waste first we derive shadow prices of carbon dioxide and low level waste as marginal abatement costs in the case of the electric power sector in japan employing a directional output distance function it is found that the shadow prices are us 39 per tonne for carbon dioxide and us 1531 per liter for low level waste secondly we calculate the indirect morishima elasticity between carbon dioxide and low level waste in order to identify their substitutability and it is found that the substitution of low level waste for carbon dioxide is easier than the reverse this result suggests that with the amount of generated electricity fixed carbon dioxide can be substituted more easily by low level waste when the relative price of carbon dioxide increases for example as a result of implementation of a carbon dioxide tax or an emissions trading system

bilateralism and free trade we study a setting with many countries in each country there are firms that can sell in the domestic as well as foreign markets countries can sign bilateral free trade agreements that lower import tariffs and thereby facilitate trade we allow a country to sign any number of bilateral free trade agreements a profile of free trade agreements defines the trading regime our principal finding is that in symmetric settings bilateralism is consistent with global free trade we also explore the effects of asymmetries across countries and political economy considerations on the incentives to form trade agreements

non stationary stochastic inventory lot sizing with emission and service level constraints in a carbon cap and trade system firms worldwide are taking major initiatives to reduce the carbon footprint of their supply chains in response to the growing governmental and consumer pressures in real life these supply chains face stochastic and non stationary demand but most of the studies on inventory lot sizing problem with emission concerns consider deterministic demand in this paper we study the inventory lot sizing problem under non stationary stochastic demand condition with emission and cycle service level constraints considering carbon cap and trade regulatory mechanism using a mixed integer linear programming model this paper aims to investigate the effects of emission parameters product and system related features on the supply chain performance through extensive computational experiments to cover general type business settings and not a specific scenario results show that cycle service level and demand coefficient of variation have significant impacts on total cost and emission irrespective of level of demand variability while the impact of product s demand pattern is significant only at lower level of demand variability finally results also show that increasing value of carbon price reduces total cost total emission and total inventory and the scope of emission reduction by increasing carbon price is greater at higher levels of cycle service level and demand coefficient of variation the analysis of results helps supply chain managers to take right decision in different demand and service level situations

estimating the marginal abatement cost curve of co2 emissions in china provincial panel data analysis abstract this paper estimates the marginal abatement cost curve macc of co2 emissions in china based on a provincial panel for the period of 2001 2010 the provincial marginal abatement cost mac of co2 emissions is estimated using a parameterized directional output distance function four types of model specifications are applied to fit the mac carbon intensity pairs the optimal specification controlling for various covariates is identified econometrically a scenario simulation of china s 40 45 carbon intensity reduction based on our macc is illustrated our simulation results show that china would incur a 559 623 yuan t roughly 51 57 increase in marginal abatement cost to achieve a corresponding 40 45 reduction in carbon intensity compared to its 2005 level

free trade agreements as dynamic farsighted networks in the presence of multilateral negotiations are free trade agreements ftas necessary for or will they prevent global free trade i answer this question using a dynamic farsighted model of network formation among asymmetric countries ultimately ftas prevent global free trade when there are two larger countries and one smaller country but ftas can be necessary for global free trade when there are two smaller countries and one larger country the model provides insights into the dynamics of recent real world negotiations and recent results in the literature on the empirical determinants of trade agreements jel c71 f12 f13

alliances in international governmental organizations regional trade agreement formation and multinational enterprise regionalization strategy abstract drawing from political science alliance theories we explain why countries are likely to enter regional trade agreements we argue that the probability that this will happen is higher if the countries are allies in the same international governmental organizations igos as such alliances can help build trust and reduce political risk our results show that igo scope and also partner reliability and influence in the igo network play important roles our findings provide guidance to multinational enterprises in formulating regionalization strategies

valuation of marginal co2 abatement options for electric power plants in korea the electricity generation sector in korea is under pressure to mitigate greenhouse gases as directed by the kyoto protocol the principal compliance options for power companies under the cap and trade include the application of direct co2 emission abatement and the procurement of emission allowances the objective of this paper is to provide an analytical framework for assessing the cost effectiveness of these options we attempt to derive the marginal abatement cost for co2 using the output distance function and analyze the relative advantages of emission allowance procurement option as compared to direct abatement option real option approach is adopted to incorporate emission allowance price uncertainty empirical result shows the marginal abatement cost with an average of 14 04 ton co2 for fossil fueled power plants and confirms the existence of substantial cost heterogeneity among plants which is sufficient to achieve trading gains in allowance market the comparison of two options enables us to identify the optimal position of the compliance for each plant sensitivity analyses are also presented with regard to several key parameters including the initial allowance prices and interest rate the result of this paper may help korean power plants to prepare for upcoming regulations targeted toward the reduction of domestic greenhouse gases

quantifying co2 abatement costs in the power sector co2 cap and trade mechanisms and co2 emission taxes are becoming increasingly widespread to assess the impact of a co2 price marginal abatement cost curves maccs are a commonly used tool by policy makers providing a direct graphical link between a co2 price and the expected abatement however such maccs can suffer from issues related to robustness and granularity this paper focuses on the relation between a co2 emission cost and co2 emission reductions in the power sector the authors present a new methodology that improves the understanding of the relation between a co2 cost and co2 abatement the methodology is based on the insight that co2 emissions in the power sector are driven by the composition of the conventional power portfolio the residual load and the generation costs of the conventional units the methodology addresses both the robustness issue and the granularity issue related to maccs the methodology is based on a bottom up approach starting from engineering knowledge of the power sector it offers policy makers a new tool to assess co2 abatement options the methodology is applied to the central western european power system and illustrates possible interaction effects between e g fuel switching and renewables deployment

multiple items procurement under stochastic nonstationary demands abstract in the consumer goods wholesaling and retailing industry a large number of stock keeping units must be managed on a regular basis the items are typically purchased in families each family being associated with a specific external vendor and usually there are some constraints on family order quantities and there are frequent opportunities to buy at a temporary low price the demand for an item is often stochastic and not stationary in this paper by computing procurement plans over rolling planning horizons we transform this difficult sequential decision problem into a multi period static decision problem under risk the problem is initially formulated as a stochastic program with simple recourse and a branch and bound algorithm is designed to solve an equivalent deterministic program a piecewise concave approximation is proposed to reduce this program to a linear program with one 0 1 variable per planning period the performances of the algorithms are studied in two simulation experiments the simulations show that when planning over a rolling horizon the approach proposed yields excellent results

economic determinants of the timing of preferential trade agreement formations and enlargements preferential trade agreements ptas have proliferated over the past 60 years while a small number of recent studies have examined empirically the economic determinants of the likelihood of a pair of countries having a pta this study explains empirically the timing of all pta formations and enlargements from 1950 through 2006 using duration analysis our main and novel goal is to predict in and out of sample a substantive share of these 1 560 pta events using a parsimonious model with mainly economic variables taking selection dynamics into account our analysis reveals that we can predict correctly in sample the actual year of entry into force for 26 of the 1 560 bilateral pta formations enlargements in the period 1950 2006 among 10 518 pairings of 146 countries using only a few economic and political variables moreover we can predict correctly in sample 57 of these pta events within a 10 year window leading up to the event using this model the model also performs well out of sample for the near term 82 but not if the out of sample period is very long we conclude with an evaluation of the model s ability to predict the timing of the north american free trade agreement the european union s formation and enlargements and the model s ten most likely post 2006 pta events jel f14 f15

co2 abatement from renewables in the german electricity sector does a co2 price help abstract the overlapping impact of the emission trading system ets and renewable energy re deployment targets creates a classic case of interaction effects whereas the price interaction is widely recognized and has been thoroughly discussed the effect of an overlapping instrument on the abatement attributable to an instrument has gained little attention this paper estimates the actual reduction in demand for european union allowances that has occurred due to re deployment focusing on the german electricity sector for the five years 2006 through 2010 based on a unit commitment model we estimate that co 2 emissions from the german electricity sector are reduced by 35 to 60 mtons or 10 to 18 of what estimated emissions would have been without any re policy but with the co 2 price remaining in place at the observed level furthermore we find that the abatement attributable to re injections is greater in the presence of an allowance price than otherwise the same holds for the ets effect in presence of re injection this interaction effect is consistently positive for the german electricity system at least for the considered years and on the order of 0 5 to 1 5 of emissions

combining bottom up and top down abstract we motivate the formulation of market equilibrium as a mixed complementarity problem which explicitly represents weak inequalities and complementarity between decision variables and equilibrium conditions the complementarity format permits an energy economy model to combine technological detail of a bottom up energy system with a second best characterization of the over all economy our primary objective is pedagogic we first lay out the complementarity features of economic equilibrium and demonstrate how we can integrate bottom up activity analysis into a top down representation of the broader economy we then provide a stylized numerical example of an integrated model within both static and dynamic settings finally we present illustrative applications to three themes figuring prominently on the energy policy agenda of many industrialized countries nuclear phase out green quotas and environmental tax reforms

do deep trade agreements boost vertical fdi an increasing number of preferential trade agreements ptas and the rise of offshore production are distinctive features of the modern world economy exploiting the world trade organization wto database on the content of deep trade agreements the authors build on the existing literature to investigate whether deep trade agreements between countries are related to vertical foreign direct investment fdi specifically the authors show that deeper trade agreements increase vertical fdi measured with a proxy constructed in osnago rocha and ruta with data on foreign firm ownership and subsidiaries revenues available in the orbis database

managers investors and crises mutual fund strategies in emerging markets the authors address the trading strategies of mutual funds in emerging markets the data set they develop permits analyses of these strategies at the level of individual portfolios a methodologically novel feature of their analysis they disentangle the behavior of fund managers from that of investors for both managers and investors they strongly reject the null hypothesis of no momentum trading funds momentum trading is positive they systematically buy winners and sell losers contemporaneous momentum trading buying current winners and selling current losers is stronger during crises and stronger for fund investors than for fund managers lagged momentum trading buying past winners and selling past losers is stronger during noncrises and stronger for fund managers investors also engage in contagion trading selling assets from one country when asset prices fall in another these findings are based on data about mutual funds that represent only 10 percent of the market capitalization in the countries considered were it a larger share of the market finding counterparties for their trades the investors who buy when they sell and sell when they buy would be difficult and the premise that funds respond to contemporaneous returns rather than causing them would become tenuous

multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

order quantities for perishable inventory control with non stationary demand and a fill rate constraint abstract we study the practical decision problem of fresh food production with a long production lead time to decide every period e g week how many items to produce when a batch is ready for use its items have a fixed shelf life after which the items become waste in the sense that they cannot be sold anymore the demand for fresh food products is uncertain and highly fluctuating mainly caused by price promotions of retail organisations we focus on cases where a so called cycle fill rate service level requirement applies we investigate the generation of a production plan that fixes the timing and quantity of the production for a finite time horizon to minimise waste one issues the oldest items first i e a fifo issuing policy in case of out of stock sales are lost we model this decision problem as a stochastic programming sp model the objective of our study is to find order quantities for the sp model that approximately meet cycle fill rate service level requirements while keeping outdating low to find approximate solutions for the sp model an milp model is developed the milp model is a deterministic approximation that generates feasible replenishment quantities in less than a second with a scenario based minlp approach optimal solutions are generated for a large sample of demand paths as a benchmark for the milp solutions we show that the milp model is suitable for practical use if the setup cost is such that the replenishment cycles in the production plan are close to or of the same length as the maximum shelf life in those cases the expected total costs are close to the costs of the optimal solution and the average fill rate is close to the required one

the stochastic dynamic production inventory lot sizing problem with service level constraints abstract this paper addresses the multi period single item inventory lot sizing problem with stochastic demands under the static dynamic uncertainty strategy of bookbinder and tan manage sci 34 1988 1096 in the static dynamic uncertainty strategy the replenishment periods are fixed at the beginning of the planning horizon but the actual orders are determined only at those replenishment periods and will depend upon the demand that is realised their solution heuristic was a two stage process of firstly fixing the replenishment periods and then secondly determining what adjustments should be made to the planned orders as demand was realised we present a mixed integer programming formulation that determines both in a single step giving the optimal solution for the static dynamic uncertainty strategy the total expected inventory holding ordering and direct item costs during the planning horizon are minimised under the constraint that the probability that the closing inventory in each time period will not be negative is set to at least a certain value this formulation includes the effect of a unit variable purchase production cost which was excluded by the two stage bookbinder tan heuristic an evaluation of the accuracy of the heuristic against the optimal solution for the case of a zero unit purchase production cost is made for a wide variety of demand patterns coefficients of demand variability and relative holding cost to ordering cost ratios the practical constraint of non negative orders and the existence of the unit variable cost mean that the replenishment cycles cannot be treated independently and so the problem cannot be solved as a stochastic form of the wagner whitin problem applying the shortest route algorithm

optimal dynamic procurement policies for a storable commodity with levy prices and convex holding costs abstract in this paper we study a continuous time stochastic inventory model for a commodity traded in the spot market and whose supply purchase is affected by price and demand uncertainty a firm aims at meeting a random demand of the commodity at a random time by maximizing total expected profits we model the firm s optimal procurement problem as a singular stochastic control problem in which controls are nondecreasing processes and represent the cumulative investment made by the firm in the spot market a so called stochastic monotone follower problem we assume a general exponential levy process for the commodity s spot price rather than the commonly used geometric brownian motion and general convex holding costs we obtain necessary and sufficient first order conditions for optimality and we provide the optimal procurement policy in terms of a base inventory process that is a minimal time dependent desirable inventory level that the firm s manager must reach at any time in particular in the case of linear holding costs and exponentially distributed demand we are also able to obtain the explicit analytic form of the optimal policy and a probabilistic representation of the optimal revenue the paper is completed by some computer drawings of the optimal inventory when spot prices are given by a geometric brownian motion and by an exponential jump diffusion process in the first case we also make a numerical comparison between the value function and the revenue associated to the classical static newsvendor strategy

on the different geographic characteristics of free trade agreements and customs unions abstract casual observation reveals a striking phenomenon of preferential trade agreements ptas while customs unions cus are only intra regional free trade agreements ftas are inter and intra regional using a farsighted dynamic model we endogenize the equilibrium path of ptas among two close countries and one far country rising transport costs mitigate the cost of discrimination faced by the far country as a cu non member and diminish the value of preferential access as a cu member thus sufficiently large transport costs imply that an fta is the only type of pta that can induce the far country s participation in pta formation unlike cu formation fta formation can induce participation because ftas provide a flexibility benefit an fta member can form further ptas with non members but a cu member must do so jointly with all existing members hence in equilibrium cus are intra regional while ftas are intra and inter regional

the size of trading blocs market power and world welfare effects abstract we construct an n country n commodity trade model to analyze the implications of bloc size for nash equilibrium tariffs and welfare the relationship between the absolute size of symmetric trading blocs and their market power is ambiguous and we illustrate how this relationship varies with model parameters in contrast sufficiently large increases in the relative size of a bloc enhance its relative market power and cause the welfare of its country members to rise above the free trade level we establish the existence of an optimal bloc size and study the dependence of optimal size on the parameters of the model

inventory models with minimal service level constraints abstract this paper investigates inventory models in which the stockout cost is replaced by a minimal service level constraint slc that requires a certain level of service to be met in every period the minimal service level approach has the virtue of simplifying the computation of an optimal ordering policy because the optimal reorder level is solely determined by the minimal slc and demand distributions it is found that above a certain critical service level the optimal s s policy collapses to a simple base stock or order up to level policy which is independent on the cost parameters this shows the minimal slc models to be qualitatively different from their shortage cost counterparts we also demonstrate that the imputed shortage cost transforming a minimal slc model to a shortage cost model does not generally exist the minimal slc approach is extended to models with negligible set up costs the optimality of myopic base stock policies is established under mild conditions

farsighted network formation this paper studies a model of dynamic network formation when individuals are farsighted players evaluate the desirability of a current move in terms of its consequences on the entire discounted stream of payoffs we define a concept of equilibrium which takes into account farsighted behavior of agents and allows for limited cooperation amongst agents we show that an equilibrium process of network formation exists we also show that there are valuation structures in which no equilibrium strategy profile can sustain efficient networks we then provide sufficient conditions under which the equilibrium process will yield efficient outcomes

inventory policies for systems with stochastic and deterministic demand we consider a periodic review inventory system with demand arriving simultaneously from a deterministic source and a random source the deterministic demand has to be satisfied immediately and the stochastic demand can be backordered assuming that the stochastic demand is never backlogged if there is stock in the system we prove that a modified s s policy is optimal under general conditions if there is a setup cost if there is a smoothing cost instead of the setup cost we observe that the problem corresponds to a standard model with one source of demand

the applicability of marginal abatement cost approach a comprehensive review abstract the marginal abatement cost mac methodology is widely used in climate change policies policy makers rely on mac to assess feasible strategies and related costs to achieve emission reduction goals this paper introduces a variety of mac methodologies aiming at solving diverse problems which utilizes various calculable logic thus producing different results and implications this study applies a mind mapping method to capture differentiation of mac methods and systematically classify mac methodologies the applicability path analysis was proposed based on principles such as stakeholder type decision making objectives cost concept strategy mode and information scope our goal is to assess the applicability of different methodologies to reduce misuse by policy makers and to serve as a guide for subsequent research which might prompt and lead to the derivation of more consequential results in future studies the results of this study suggest that the complex method is not always better than the simplified method because policy makers are required to select the appropriate method according to the type of information needed it may even be suggested that mac could be reliable by ranking relative value of options compared with baseline rather than focusing on the absolute value of individual measures

an approach to evaluate the impact of interaction between demand forecasting method and stock control policy on the inventory system performances abstract usually in stock control studies demand data are considered as an input to the model without explicitly considering that they are the results of a demand forecasting system stock control system is examined independently of the demand forecasting system and it is assumed that demand data or forecast errors have been properly modelled however the interactions that may exist between demand forecasting methods and stock control systems in terms of their effects on global system performances are not considered in the paper an approach for evaluating these interactions based on a comparative simulation test of global system costs using historical data is presented the approach is explained through a real case the replenishment from different suppliers of a central depot of tinned food which supplies more than 700 items to warehouses at the lower echelon results of the simulation study show that traditional measures of forecast errors cannot be taken as sole indicators for the choice among different demand forecasting methods these methods on the contrary have to be evaluated on the basis of total costs and service level of the global inventory control system

third country effects on the formation of free trade agreements the recent proliferation of free trade agreements ftas has resulted in an increasingly complex network of preferential trading relationships the economics literature has generally examined the formation of ftas as a function of the participating countries economic characteristics alone in this paper we show both theoretically and empirically that the decision to enter into an fta is also crucially dependent on the participating countries existing fta relationships with third countries accounting for the interdependence of ftas helps to explain a significant fraction of fta formations that would not otherwise be predicted by countries economic characteristics

a strategic and welfare theoretic analysis of free trade areas abstract we construct a three country model to determine how the formation of free trade areas ftas affects optimal tariffs and welfare we find that at constant rest of the world row tariffs the adoption of internal free trade induces union members to reduce their external tariffs below the kemp wan j int econom 6 1976 95 97 level and causes row s terms of trade to improve and its welfare to rise when row also behaves optimally its policy response to the formation of the fta is to raise tariffs generally fta members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large we also demonstrate how ftas may undermine the attainment of global free trade

dynamic formation of preferential trade agreements the role of flexibility in practice free trade agreements ftas vastly outnumber customs unions cus nevertheless the literature traditionally views cus as optimal for members because cu members coordinate external tariffs i show that a dynamic fta flexibility benefit can help explain the prevalence of ftas individual fta members have the flexibility to form their own future ftas whereas cu members must jointly engage in future cu formation i show how the relative prevalence of ftas versus cus depends on the structure of market size asymmetry across countries and use these predictions to shed some light on fta versus cu formation in europe and south america formation dynamique d accords commerciaux preferentiels le role de la flexibilite en pratique les accords de libre echange ale sont plus nombreux que les unions douanieres ud neanmoins la litterature specialisee percoit traditionnellement que les ud sont optimales pour les membres parce qu ils peuvent coordonner leurs tarifs externes on montre qu une flexibilite dynamique de l ale peut aider a expliquer la prevalence des ale les membres des ale ont la flexibilite de former leurs propres ale dans l avenir alors que les membres des ud s engagent conjointement pour la formation des ud futures on montre comment la prevalence des ale versus les ud depend de la structure de l asymetrie de la taille entre les pays et on utilise ces previsions pour eclairer les choix entre la formation de ale et de ud en europe et en amerique du sud

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

free trade networks abstract the paper examines the formation of free trade agreements ftas as a network formation game we consider an n country model in which possibly asymmetric countries trade differentiated industrial commodities we show that if all countries are symmetric the complete fta network is pairwise stable and it is the unique stable network if industrial commodities are not highly substitutable we also compare ftas and customs unions cus as to which of these two regimes facilitates global trade liberalization noticing that unlike cus each signatory of an fta can have another fta without consent of other member countries

preferential trade agreements and multilateral tariff cooperation are preferential trade agreements ptas building or stumbling blocks for multilateral trade liberalization i address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly the central result is that when countries are symmetric a free trade agreement fta undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union cu does so via its effect on the cooperation incentives of members however when countries are asymmetric with respect to either market size or cost there exist circumstances where ptas facilitate multilateral tariff cooperation

negotiating free trade we develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once we show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining and we identify circumstances in which the grand coalition is the equilibrium outcome leading to worldwide free trade a model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection global free trade is not achieved when the political economy motive for protection is sufficiently large furthermore the model generates both building bloc and stumbling bloc effects of preferential trade agreements in particular we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form a building bloc effect and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden a stumbling bloc effect the analysis identifies conditions under which each of these outcomes emerges

tariffs and formation of free trade agreements networks this paper examines the formation of bilateral free trade agreements ftas on the basis of country heterogeneity in the tariff level we demonstrate that a country s unilateral incentive to form an fta depends on the relative magnitudes of the negative market concession effect and the positive market expansion effect both of which are determined by the tariff levels of the two fta partner countries global welfare is maximised when all country pairs form ftas two countries in equilibrium are more likely to form an fta when their tariff gap is smaller or when their tariff levels are neither very high nor very low this finding is robust to several extensions of the model our preliminary empirical analysis provides some evidence for the finding