conditional production smoothing in the united kingdom and japan this article investigates the possibility of macroeconomic conditional production smoothing of inventory investment in japan and the uk it is argued that both unconditional and conditional variances and covariances can be useful to interpret the time paths of sales and production after sales and production shocks the vector error correction model of sales and production is estimated by the bivariate garch procedure based on the cointegration relationship between these variables in the two countries the relative magnitude of the conditional variances of sales and production is explained in terms of sales anticipation errors the relative importance of sales and production shocks and serial correlation in sales shocks the relation of how the conditional second moment corresponds to business cycle phases is briefly analyzed

seasonality and the production smoothing model abstract the debate over whether firms smooth production relative to demand continues in this paper we find that results obtained in blinder quarterly journal of economics 101 3 1986 431 453 and blinder and maccini journal of economic surveys 5 4 1991 293 328 indicating that firms do not smooth production are greatly influenced by the seasonal adjustment of the census data for us manufacturing using seasonally adjusted data we find significant evidence of production smoothing in 10 of 14 manufacturing industries for the years 1982 1997 further the prevalence of production smoothing has increased over time which we attribute either to fundamental changes in the collection of the data or to the advent of improved methods of inventory management

inventory dynamics and business cycles what has changed to what extent can information technology led improvements in inventory management account for the apparent moderation of economic fluctuations in the united states since the mid 1980s we argue that changes in inventory dynamics played a reinforcing rather than a leading role in the reduction of output volatility since the mid 1980s inventory dynamics have changed in a manner consistent with a faster resolution of inventory imbalances however these changes appear to be a consequence of changes in the response of industry level sales and aggregate economic activity to monetary policy shocks our results suggest that it is the interaction between the changes in inventory behavior at the industry level and the macroeconomic environment where the latter likely includes changes in the conduct of monetary policy and the responses of the economy to policy disturbances rather than any single factor that has contributed importantly to the observed decline in economic volatility

conspicuous consumption and sophisticated thinking consumers purchase conspicuous goods to satisfy not only material needs but also social needs such as prestige in an attempt to meet these social needs producers of conspicuous goods like cars perfumes and watches highlight the exclusivity of their products in this paper we propose a monopoly model of conspicuous consumption using the rational expectations framework and then examine how purchase decisions are affected by the desire for exclusivity and conformity we show that snobs can have an upward sloping demand curve but only in the presence of consumers who are weakly followers laboratory tests lend support for this model prediction and for the rational expectations framework the experimental results suggest that subjects used some degree of sophisticated thinking to arrive at their first period decisions their behavior in the subsequent trials however can be adequately captured by a purely adaptive learning mechanism we discuss the implications of consumer learning for optimal dynamic pricing policy by a monopolist

classical and variance bounds tests of the production smoothing hypothesis in this paper we test the controversial production smoothing role of inventories by applying both classical econometric techniques and variance bounds tests we use seasonally unadjusted data measured in physical units for five industries the model used is a version of the familiar holt et al 1960 inventory model we also use the data on one industry disaggregated at the district level to investigate potential bias which may arise from aggregation overall the empirical evidence suggests production smoothing in the great majority of the industries examined

measuring noise in inventory models this paper has two purposes one is to assess different models of inventory behavior in terms of their ability to approximate the realized data we do this initially for the pure production smoothing model and then for a sequence of generalizations our analysis both performs specification tests as well as measures the deviations of the data from each null model through use of a noise ratio statistic a second purpose is to explore whether observed cost shocks in particular raw materials prices help explain inventory movements we find that the production smoothing model of inventories augmented by buffer stock motives stockout avoidance motives and observed cost shocks well approximates monthly data

a wallet full of calories the effect of financial dissatisfaction on the desire for food energy this study shows that people experiencing financial dissatisfaction may choose and consume food for its energy value because money and food are closely related exchangeable resources financially dissatisfied people may be motivated to replenish their need for financial resources by consuming caloric resources or food energy five experiments provide support for this hypothesis across various measures of caloric desire and actual eating behavior the findings have notable implications for marketing and public policy whereas marketing researchers have increasingly investigated the interplay of taste and health considerations in food consumption this research demonstrates the importance of investigating food energy considerations

monetary policy and inventory investment in greek manufacturing industry the paper reports an attempt to estimate the role of greek monetary policy in inventory investment in manufacturing interest and inflation rate expectations exercise a significant influence expected fluctations in the exchange rate for the first time examined are of major importance especially for stocks of raw materials which are mostly imported being strongly affected by monetary variables inventory investment can play a major role as a transmission channel of monetary policy changes to the greek economy

understanding the inventory cycle abstract careful examination of aggregate data from the u s and other oecd countries reveals that production and inventory behavior exhibit paradoxical features 1 inventory investment is strongly countercyclical at very high frequencies e g 2 3 quarters per cycle it is procyclical only at relatively low cyclical frequencies such as the business cycle frequencies e g 8 40 quarters per cycle 2 production is less volatile than sales around the high frequencies it is more volatile than sales only around business cycle or lower frequencies 3 unlike capital investment or gdp the bulk of the variance of inventory investment is concentrated around high frequencies rather than around business cycle frequencies these features of production and inventory behavior at the low and high frequencies provide a litmus test for inventory theories this paper shows that the stockout avoidance theory kahn j 1987 inventories and the volatility of production american economic review 77 667 679 has much better potential than other competing theories for explaining the seemingly paradoxical features of inventory fluctuations observed at different cyclical frequencies my analysis suggests that demand shocks are the main source of the business cycle

inventories and interest rates a critique of the buffer stock model economists generally test for the effect of interest rates on inventories by including some measure of the real interest rate in a standard flexible accelerator buffer stock model this paper presentsseveral reasons for concluding that this approach is incorrect and demonstrates how interest rate effects can be introduced into decisionrules derived under the assumption of optimizing behavior by firms decision rules for finished good inventories output and price are estimated using monthly observations on the food and kindred product industry the results generally conform to the predictions of the theory copyright 1986 by american economic association

the cyclical behavior of prices and quantities the case of the automobile market abstract this paper aims at understanding the joint behavior of prices and quantities in a particular market it examines whether we can find decision problems for suppliers and buyers together with a market structure which are consistent with observed price and quantity series because of the homogeneity of the product and the quality of the data we study the automobile market we conclude that the behavior of prices is inconsistent with simple market structures prices appear to be too sticky we then consider potential explanations none appears completely satisfactory in particular costs of changing prices do not explain the joint behavior of prices and quantities

estimating tax noncompliance with evidence from unaudited tax returns this article estimates the degree of tax noncompliance using evidence from unaudited tax returns measurements of noncompliance are derived from the relationship between reported charitable contributions and reported income from wages and salary as compared to alternative reported income sources such as self employment farm and other small business income assuming that the source of one s income is unrelated to one s charitable inclinations and that the ratio of true income to taxable income does not vary by income source any difference in the relationship between charitable contributions and the source of income can be attributed to relative underreporting by the individual we find that the implied amount of noncompliance is significant and that it varies by source of income as well as between positive and negative values of each type of income tax evasion creates horizontal inequity and if opportunities for evasion are correlated with income complicates the attempt to achieve vertical equity evasion also imposes economic costs because taxpayers expend resources to facilitate evasion and the tax agency expends resources to contain it the equity and efficiency implications of tax evasion and optimal policy to address it depend on its magnitude and nature which for obvious reasons is difficult to ascertain this article contributes to that effort by developing a new method for estimating the extent and nature of tax noncompliance based on evidence from unaudited tax returns this evidence is derived from the relationship between reported charitable contributions and reported taxable income from various sources such as wages and salaries selfemployment nonfarm small business and farm income and is based on the assumptions that the source of one s income is unrelated to one s charitable inclinations and that the ratio of true income to taxable income does not vary by income source we find that the implied amount of noncompliance on non wageand salary income is substantial and that it varies among these sources of income as well as between positive and negative values of each type of income on average reported positive self employment nonfarm small business and farm income must be multiplied by a factor of 1 54 4 54 and 3 87 respectively in order to obtain true income even those individuals who report zero income for a specific income source but file the schedule for that source are estimated to have true positive income finally those households that report negative schedule income may actually have greater true income than those households that report positive income

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

how economic contractions and expansions affect expenditure patterns in this study we attempt to understand how household budget allocations across various expenditure categories change when the economy is in recession or expansion the common assumption is that a household s tastes would not change as a function of economic conditions and therefore any adjustments in expenditure patterns during economic contractions expansions would simply be due to changes in the consumption budget standard economic models translate these budgetary effects into lateral movements along a set of fixed engel curves which relate category expenditure shares to total expenditures we propose and test a conceptual framework based on the notion of relative consumption which prescribes that for any given total consumption budget expenditure shares for positional goods services will decrease during a recession while shares for nonpositional goods services will increase i e shifting the entire engel curve upward or downward depending on the nature of the expenditure category and the economic conditions

reducing evasion through self reporting evidence from charitable contributions abstract in absence of third party reporting taxpayers are required to self report information with various degrees of detail ranging from uncorroborated claims to comprehensive records with receipts using a quasi experimental design applied to noncash charitable contribution deductions i show that even basic self reporting requirements are effective at reducing evasion but impose large compliance costs on taxpayers i find that simplified reporting requirements reduce reporting costs by 55 per person and substantially increase claimed donations however half of the new donations are due to evasion thus information reporting should only be imposed on total reported donations above a pre specified threshold

the stabilizing effect of inventory in supply chains this paper presents a hierarchical model framework for the analysis of the stabilizing effect of inventories in multiechelon manufacturing distribution supply chains this framework is used to compare the variance of demand to the variance of replenishment orders at different echelons of the system e g retailer wholesaler empirical data and experience with management games suggest that in most industries inventory management policies can have a destabilizing effect by increasing the volatility of demand as it passes up through the chain the bullwhip effect our model helps to explain these observations and indicates mechanisms that can promote stabilization the analysis results also define sufficient conditions for the existence of stabilization and relate these conditions to the optimality of myopic control policies

german inventory to sales ratios 1971 2005 an empirical analysis of business practice abstract the purpose of this study is to test empirically for the first time the general hypothesis that inventory to sales ratios have decreased over time in the german economy although inventory reduction has been a prevalent topic in the production and operations management literature there is a lack of empirically confirmed answers to questions they are as follows have inventories in german firms decreased overall during the past decades what sectors of german industry are leading lagging behind inventory reduction has inventory reduction developed differently for raw materials work in process or finished goods in which periods was marginal inventory reduction greatest to the best of our knowledge this empirical study is the first to broadly investigate inventory development from the 1970s until the present for a major european economy germany and will provide the first answers to the research questions stated above using aggregate industry level data provided by the deutsche bundesbank we show that inventory levels decreased overall in many sectors of german industry this reduction was mainly marked for raw materials and finished goods particularly for the second half of the time frame investigated

frames of reference and the quality of life asked to choose most people state confidently that they would rather be killed in an automobile accident than to survive a quadraplegic and so we are not surprised to learn that severely disabled people experience a period of devastating depression and disorientation in the wake of their accidents what we do not expect however are the speed and extent to which many of these victims accommodate to their new circumstances within a year s time many quadraplegics report the same mix of moods and emotions as able bodied people do there is also evidence that the blind the retarded and the malformed are no less happy than other people ads for the new york state lottery show participants fantasizing about how their lives would change if they won i d buy the company and fire my boss people who actually do win the lottery report the anticipated rush of euphoria in the weeks after their good fortune followup studies done after several years however indicate that these people are no happier indeed are in many ways less happy than before as a young man fresh out of college i served as a peace corps volunteer in rural nepal my one room house had no electricity no heat no indoor toilet no running water the local diet offered little variety and virtually no meat and yet at no time during my two year stay in nepal did i experience a sense of material deprivation on the contrary my monthly stipend of 40 was much more than most others in my village had and with it i experienced a feeling of prosperity that i have recaptured only in recent years these observations illustrate the critical role of context as a determinant of human satisfaction the neoclassical economic model of choice abstracts from context saying that utility depends only on the level of consumption consumption levels obviously are important and the neoclassical model performs reasonably well in many instances and yet its narrow focus misses something important to predict people s behavior to draw inferences about their well being or to make intelligent policy decisions we must not only know the relevant levels of consumption but also have an appropriate frame of reference within which to evaluate them

charitable contributions and intergenerational transfers abstract this paper investigates the effects of bequest taxes and the income of children on the lifetime charitable contributions of parents using matched income tax records for parents and children the results show a positive elasticity of 0 6 for contributions with respect to the tax price of bequests the paper also finds that the income of children affects the amount that parents contribute to charity the results show a positive elasticity of up to 0 14 for contributions by parents with respect to the income of children implying that when children are better off parents are likely to increase charitable giving

the production and inventory behavior of the american automobile industry understanding inventory movements is central to an understanding of business cycles this paper presents an empirical study of the behavior of inventories in the automobile industry it finds that inventory behavior is well explained by the assumption of intertemporal optimization with rational expectations the underlying cost structure appears to have substantial costs of changing production as well as substantial costs of being away from target inventory thelatter being a function of current sales given this cost structure whether inventory behavior is stabilizing or destabilizing depends on the characteristics of the demand process in the automobile industry inventory behavior is destabilizing the variance of production is larger than the variance of sales

the effect of tax enforcement on tax elasticities evidence from charitable contributions in france optimal tax formulas expressed in sufficient statistics are usually calibrated under the assumption that the relevant tax elasticities are unaffected by other available policy instruments in practice though tax authorities have many more instruments than the mere tax rates and tax elasticities are functions of all these policy instruments in this paper we provide evidence that tax elasticities are extremely sensitive to a particular policy instrument the level of tax enforcement we exploit a natural experiment that took place in france in 1983 when the tax administration tightened the requirements to claim charitable deductions the reform led to a substantial drop in the amount of contributions reported to the administration which can be credibly attributed to overreporting of charitable contributions before the reform rather than to a real change in giving behaviours we show that the reform was also associated with a substantial decline in the absolute value of the elasticity of reported contributions this finding allows us to partially identify the elasticity of overreporting contributions which is shown to be large and inferior to 2 in the lax enforcement regime we further show using bunching of taxpayers at kink points of the tax schedule that the elasticity of taxable income also experienced a significant decline after the reform our results suggest that optimizing the tax rate for a given tax elasticity when other policy instruments are not optimized can lead to misleading conclusions when tax authorities have another instrument that could set the tax elasticity itself at its optimal level as in kopczuk and slemrod 2002

a measure of bullwhip effect in supply chains with a mixed autoregressive moving average demand process abstract in this paper we quantify the impact of the bullwhip effect the phenomenon in which information on demand is distorted as moving up a supply chain for a simple two stage supply chain with one supplier and one retailer assuming that the retailer employs a base stock inventory policy and that the demand forecast is performed via a mixed autoregressive moving average model arma 1 1 we investigate the effects of the autoregressive coefficient the moving average parameter and the lead time on the bullwhip effect

vector rational error correction abstract systems of forward looking linear decision rules can be formulated as vector rational error correction models the closed form solution of the restricted error corrections is derived and a full information estimator is suggested the error correction format indicates that the assumptions of convex adjustment costs and rational expectations impose different types of a priori restrictions on the dynamic structure of the error corrections an empirical model of the producer decision rule for capital investment illustrates that the data rejects dynamic restrictions imposed by a standard model of adjustment costs but supports a more general description of convex frictions

wealth and welfare divergent moral reactions to ethical consumer choices this article examines perceptions of low income consumers receiving government assistance and the choices they make showing that this group is viewed differently than those with more resources even when making identical choices a series of five experiments reveal that ethical purchases polarize moral judgments whereas individuals receiving government assistance are perceived as less moral when choosing ethical vs conventional products income earners particularly high income individuals are perceived as more moral for making the identical choice price is a central component of this effect because equating the cost of ethical and conventional goods provides those receiving government assistance some protection against harsh moral judgments when choosing ethically moreover earning one s income drives perceptions of deservingness or the right to spend as one desires those who receive assistance via taxpayer dollars are under greater scrutiny frequently resulting in harsher moral judgments by others in addition to influencing perceptions of individual consumers the results demonstrate that such attributions extend to groups who make ethical choices on others behalf and that these attributions have real monetary consequences for nonprofit organizations

dynamic oligopoly in the rice export market a linear quadratic dynamic oligopoly model is used to estimate the competitiveness of the rice export market the model nests various market structures using either open loop or feedback strategies the estimated feedback model implies a less competitive market structure than the estimated open loop model the rice export market is oligopolistic but it is closer to competitive than collusive copyright 1989 by mit press

are estimated tax elasticities really just tax evasion elasticities the case of charitable contributions this paper uses data from tax returns that have been subject to intensive audits to confront the quantitative importance of misreporting for the estimated tax responsiveness of charitable contributions it concludes that the tax responsiveness of charitable giving that has been detected using tax return data cannot be ascribed to the tax responsiveness of overstating actual giving in fact overstatement is apparently less price responsive than actual giving implying that the responsiveness of actual giving is higher than is suggested by studying reported contributions copyright 1989 by mit press

production smoothing in the japanese vehicle industry abstract physical data from the japanese vehicle industry covering monthly observations from 1985 1 to 1994 12 are investigated across nine goods ranging from bicycles to large buses smaller variance of production is found relative to sales across all goods for unadjusted data and in 17 out of 18 cases for seasonally adjusted data such evidence in favor of the production smoothing model psm is confirmed by full information maximum likelihood employed jointly on inventories and sales equations the estimates suggest the industry operates in the range of increasing marginal costs in six out of nine goods positive costs of being away from targeted inventory are also present in six out of these nine goods which make the psm a good description of this industry

trade inventories and s s the paper presents empirical tests of the s s model of inventory behavior using aggregate retail trade data estimation and testing are based on the probability distributions of inventories derived by caplin 1985 the excess volatility of retailers demand over their consumers demand and the forgetfulness of inventories under s s are emphasized test results indicate that the time series properties of deliveries and sales are consistent with s s and not a quadratic cost model finally when autoregressions of inventories are given an s s rather than a stock adjustment interpretation traditional empirical problems such as low speeds of adjustment are explained

keeping the american dream alive the interactive effect of perceived economic mobility and materialism on impulsive spending abstractthis research illustrates how perceived economic mobility moderates the linkage between materialism and impulsive spending using various data sources four studies show that materialistic consumers do not easily engage in impulsive spending when they perceive high economic mobility whereas they tend to spend impulsively when they perceive low economic mobility however perceived economic mobility functions in the opposite manner when the purchase is a means to achieve financial success the authors trace this effect to the self regulation process of materialistic consumers such that when perceiving high economic mobility these consumers regulate their behavior toward long term financial success sacrificing the pleasure of acquisitions in the present by elucidating the important role that perceived economic mobility plays in impulsive spending the current research sheds new light on consumer research and offers managerial and public policy implications

a study of automobile inventory investment the volatile fluctuations in automobile inventory levels are explained well by the stock adjustment model estimated in this paper on monthly time series data in contrast to the findings of most previous inventory studies fluctuations in financial inventory carrying costs as measured by a service cost of capital are found to influence the target auto stocks in both a statistically significant and economically important manner also the speed of adjustment of automobile inventories to their target level is estimated to be relatively fast about thirty percent per month

is more always better a survey on positional concerns abstract we use survey data to provide some empirical information about concerns regarding relative standing respondents chose between a world where they have more of a good than others and one where everyone s endowment of the good is higher but the respondent has less than others questions asked about education attractiveness and intelligence for one s child and oneself income vacation time approval and disapproval from a supervisor and papers to write half of the respondents preferred to have 50 less real income but high relative income concerns about position were strongest for attractiveness and supervisor s praise and weakest for vacation time

running to keep in the same place consumer choice as a game of status if individuals care about their status defined as their rank in the distribution of consumption of one positional good then the consumer s problem is strategic as her utility depends on the consumption choices of others in the symmetric nash equilibrium each individual spends an inefficiently high amount on the status good using techniques from auction theory we analyze the effects of exogenous changes in the distribution of income in a richer society almost all individuals spend more on conspicuous consumption and individual utility is lower at each income level in a more equal society the poor are worse off

media coverage and charitable giving after the 2004 tsunami author affiliation philip h brown department of economics colby college 5246 mayflower hill waterville me 04901 usa e mail phbrown colby edu corresponding author jessica h minty analysis group inc 111 huntington avenue 10th floor boston ma 02199 usa e mail jminty analysisgroup com acknowledgment we are grateful to claudio agostini michael donihue martin farnham rebecca graninger daniel hamermesh melanie siben tom tietenberg andreas waldkirch seminar participants at colby college and two anonymous referees for numerous helpful comments and suggestions we would also like to acknowledge reuters alertnet and chuck lakin for their assistance in identifying data sources and care usa catholic relief services mercy corps surfaid international and four other relief agencies for providing data for the purpose of this research finally philip h brown would like to thank the international food policy research institute for sabbatical support during the preparation of this manuscript 1 introductionrelief workers have long believed in the causal relationship between media coverage of humanitarian crises and charitable giving to relief agencies for example private donations to relief agencies during the early stages of the 1994 rwandan genocide were sufficient to support approximately one million displaced rwandans but after the tribulations of o j simpson and tanya harding eclipsed rwanda in the media funding for relief activities began to decline the perception among many aid workers in the camps for rwandan refugees including one of the authors was that the media had turned its back on the crisis with potentially dire consequences 1while anecdotal evidence abounds few studies have systematically assessed the relationship between media coverage and the behavior of private donors and those that do suffer from important analytical shortcomings for example an analysis undertaken by the institute for philanthropy finds that 14 of 15 surveyed british philanthropists believe that the media has the power to encourage private giving with 11 of the 15 being inspired to make charitable donations themselves breeze 2005 similarly olsen carstenson and hoyen 2003 find a high correlation between the total number of relevant articles in western newspapers and the total amount of humanitarian assistance allocated to victims of the flooding in mozambique in 2000 and the cyclone in eastern india in 1999 unfortunately neither sample is large enough to make generalizations nor is there any attempt to quantify the magnitude of the causal relationship in part the difficulty in quantifying the relationship stems from disentangling the effect of new developments in stories covered in the media from the pure effect of media coverage returning to the rwanda case the former is tantamount to asking what is the combined effect of 10 000 additional deaths and a five minute news story on donations to u s charities while the latter is equivalent to asking given that 10 000 people were killed what is the effect of increasing the news story from five minutes to six in this paper we use the december 26 2004 tsunami as a case study to quantify the causal effect of media coverage on donations to charity specifically we consider the effects of reporting on three nightly network news broadcasts and articles in two prominent newspapers on private donations to seven u s relief agencies to eliminate the time lag between when news reports are seen or read and when donations are received by relief agencies we focus exclusively on donations made via the internet we also control for donor fatigue tax incentives and weekends to better isolate the effect of media coverage finally to alleviate simultaneity concerns and omitted variable bias including new developments in the tsunami story itself we use announcements of casualties among u

money status and the ovulatory cycle each month millions of women experience an ovulatory cycle that regulates fertility previous consumer research has found that this cycle influences women s clothing and food preferences the authors propose that the ovulatory cycle actually has a much broader effect on women s economic behavior drawing on theory in evolutionary psychology the authors hypothesize that the week long period near ovulation should boost women s desire for relative status which should alter their economic decisions findings from three studies show that women near ovulation seek positional goods to improve their social standing additional findings reveal that ovulation leads women to pursue positional goods when doing so improves relative standing compared with other women but not compared with men when playing the dictator game for example ovulating women gave smaller offers to a female partner but not to a male partner overall women s monthly hormonal fluctuations seem to have a substantial effect on consumer behav

gauging the performance of the linear quadratic inventory model the explanatory and predictive abilities of the infinite horizon linear quadratic inventory model are gauged using the flexible accelerator model as a baseline tests of explanatory power for six nondurables industries indicate that the flexible accelerator has superior explanatory power for inventories and output in the majority of industries tests of predictive ability during the late 1990s also support the superiority of the flexible accelerator model

super size me product size as a signal of status this research proposes that consumers preference for supersized food and drinks may have roots in the status signaling value of larger options an initial experiment found that consumers view larger sized options within a set as having greater status because low power consumers desire status we manipulated power to test our core propositions whether induced in the lab or in the field states of powerlessness led individuals to disproportionately choose larger food options from an assortment furthermore this preference for larger sized options was enhanced when consumption was public reversed when the size to status relationship was negative i e smaller was equated with greater status and mediated by consumers need for status this research demonstrates that choosing a product on the basis of its relative size allows consumers to signal status illustrates the consequences of such a choice for consumers food consumption and highlights the central role of a product category s size to status r

jealousy and equilibrium overconsumption the idea that the happiness of an individual depends upon the consumption of others is widely viewed as an important feature of our shared social existence recent research in finance has used this idea through consumption externalities to explore asset pricing anomalies consumption externalities potentially break the link between pareto optimality and competitive equilibria and open the door for beneficial government intervention e g lars ljungqvist and harald uhlig 2000 in this paper we delineate two effects that a consumption externality may have an increase in aggregate consumption may a raise the marginal utility of individual consumption relative to leisure and or b lower an individual s utility level we refer to a as keeping up with the joneses henceforth kuj following jordi gali 1994 and we refer to b as jealousy jealousy is a distinct concept from kuj under kuj an individual derives greater utility from additional own consumption relative to leisure when others consume more at the same time higher per capita consumption holding fixed individual consumption can trigger either jealousy so that individual utility falls or admiration so that individual utility rises in section i of this paper we show that jealousy implies that the laissez faire equilibrium consumption level is greater than the optimal level whether preferences exhibit kuj is not necessary for this main result intuitively in the presence of jealousy consumption is similar to pollution overpollution exists because individuals do not take into account the cost of polluting on others not because an increase in economywide pollution makes the return to individual polluting higher similarly overconsumption exists because individuals do not take into account the negative effect of own consumption on jealous others things go in the opposite direction when individuals are admiring in section ii we consider a functional form that encompasses several existing models we show that jealousy determines the optimal tax to correct overconsumption and that kuj is mainly important for asset pricing

testing an optimizing model of the current account via the consumption function abstract as the intertemporal allocation of consumption lies at the heart of the optimizing approach to current account determination we assess the validity of this new view by testing an open economy consumption function this method avoids some interpretation difficulties in previous studies for the four countries examined we generally could not reject the overidentifying restrictions imposed by the specification of our model an extended version of the model does not find any clear evidence of substitution between private and public consumption all our results are robust to two different measures of the external asset stock

do tax incentives affect charitable contributions evidence from public charities reported revenues this paper estimates the effect of the charitable contribution tax deduction on charities donation revenue from charities tax filings a one percent increase in the tax cost of giving causes charitable receipts to fall by about four percent an effect three times larger the consensus in the literature further analysis reveals substantial heterogeneity in the tax response by subsector health care and home care are more tax sensitive than other charities while higher education and arts are less tax sensitive the results are consistent with substantial tax response heterogeneity within the sample and between sampled and unsampled charities implying that the mean tax elasticity of charitable contributions is a poor predictor of tax incentive effects for individual charities

the equilibrium distribution of income and the market for status this paper explores the implications for risk taking behavior and the equilibrium distribution of income of assuming that the desire for status positions is a powerful motive and that it raises the marginal utility of consumption in contrast to previous analyses we consider the case in which status positions are sold in a hedonic market we show that such a complete hedonic market in status positions can be perfectly replicated by a simpler arrangement with a status good and a social norm that assigns higher status to those that consume more of this good the main result is that for a wide range of initial conditions the equilibrium distribution over income status and consumption is the same that this allocation requires inequality of income and consumption and that this allocation coincides with the optimum of a utilitarian planner

inventories employment and hours abstract this paper develops a model that integrates inventory and labor decisions we extend a model of inventory behavior to include a detailed specification of the role of labor input in the production process distinguishing between employment hours and effort per worker we estimate jointly the euler equations for inventories and employment a labor compensation schedule and an hours requirement function with the cross equation restrictions imposed the econometric results shed light on several important topics including the shape of the marginal cost of output the role of labor hoarding as an explanation of pro cyclical productivity and the persistence of inventory stocks

inventories and the automobile market this article studies the within model year pricing production and inventory management of new automobiles using new monthly data on u s transaction prices we document that for the typical vehicle prices fall over the model year at a 9 0 annual rate concurrently both sales and inventories are hump shaped to explain these time series we formulate an industry model for new automobiles in which inventory and pricing decisions are made simultaneously the model predicts that automakers build to stock inventory management policy substantially influences the time series of prices and sales accounting for four tenths of the price decline observed over the model year

a microsimulated model of inventories in interfirm competition abstract producers management of inventories of finished goods are studied with a computer simulation that depicts the interactions of a group of firms with their customers customers give orders that have a random component to their current customary suppliers and will attempt to switch to another firm if stockouts cause bad service the firms are shown experimenting to find rules of inventory management that avoid loss of customers yet incur low costs average inventories and costs under the rules that firms arrive at rise non linearly with the variance of customer orders the simulated firms respond to higher interest rates by substantial cuts in average inventories held the costs firms incur when changing the level of production also affects the rule that firms select unless firms are able to take advantage of each others experience wide variation in behavior among firms is likely under such a scenario

nonmonotonic status effects in new product adoption we investigate how the tendency to adopt a new product independently of social influence the recipients susceptibility to such influence and the sources strength of influence vary with social status leveraging insights from social psychology and sociology about middle status anxiety and conformity we propose that for products that potential adopters expect to boost their status both the tendency to adopt independently from others and the susceptibility to contagion is higher for middle status than for low and high status customers applying a nested case control design to the adoption of commercial kits used in genetic engineering we find evidence that status affects i how early or late one adopts regardless of social influence ii how susceptible one is to such influence operating through social ties and iii how influential one s own behavior is in triggering adoption by others the inverse u patterns in i and ii are consistent with middle status anxiety and conformity the findings have implications for how to use status to better understand adoption and contagion mechanisms and for targeting customers when launching new products

finished product inventories and price expectations in the softwood lumber industry a monthly model is presented of the u s softwood lumber sector price expectations and beginning period inventories have important roles in producers production sales and inventory decisions cross price effects among domestic producing regions are minimal however there is substantial competition between u s and canadian producers our model produces supply elasticities demand elasticities and inventory response parameters that are different from and more comprehensive than those obtained in previous work

a model of target inventory and markup with empirical testing using automobile industry data abstract this paper presents and tests empirically using automobile industry data a model of markup pricing based on target inventory sales lag the firm chooses target inventory together with selling price so as to maximize average per unit time profit the optimization yields a markup over direct costs equal to the inverse of the price elasticity of the sales time for the firm s inventory 1 econometric estimates of 1 for general motors ford and chrysler are compared with true markups for each firm the empirical estimates obtained for 1 are not significantly different from true markups in a statistical sense evidence that the model is compatible with the data

money isn t everything but it helps if it doesn t look used how the physical appearance of money influences spending despite evidence that currency denomination can influence spending researchers have yet to examine whether the physical appearance of money can do the same this is important because smaller denomination bills tend to suffer greater wear than larger denomination bills using real money in the context of real purchases this article demonstrates that the physical appearance of money can override the influence of denomination the reason being people want to rid themselves of worn bills because they are disgusted by the contamination from others whereas people put a premium on crisp currency because they take pride in owning bills that can be spent around others this suggests that the physical appearance of money matters more than traditionally thought and like most things in life it too is inextricably linked to the social context the results suggest that money may be less fungible than people think

the production smoothing model is alive and well abstract monthly data in physical units for seven industries are used to examine the production smoothing hypothesis the results strongly support this hypothesis significant effects of expected future sales on current production are found for four industries and the estimated decision equations for all seven industries imply production smoothing behavior the previous negative results appear to be due to the use of data biased against the hypothesis the shipments and inventory data of the department of commerce the paper also shows that sensible results can be obtained from estimating approximations to decision equations as opposed to estimating euler equations

interest rates and the market for new light vehicles we study the impact of interest rates changes on both the demand for and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates an increase in the consumers interest rate raises their cost of financing and thus lowers the demand for new vehicles an increase in the manufacturers interest rate raises their cost of holding inventories both channels have equilibrium effects that are amplified and propagated over time through inventories which serve as a way to both smooth production and facilitate greater sales at a given price through the estimation of a dynamic stochastic market equilibrium model we find evidence of both channels at work and of the important role played by inventories a temporary 100 basis point increase in both interest rates causes vehicle production to fall 12 percent and sales to fall 3 25 percent at an annual rate in the short run

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

veblen effects in a theory of conspicuous consumption the authors examine conditions under which veblen effects arise from the desire to achieve social status by signaling wealth through conspicuous consumption while veblen effects cannot ordinarily arise when preferences satisfy a single crossing property they may emerge when this property fails in that case budget brands are priced at marginal cost while luxury brands though not intrinsically superior are sold at higher prices to consumers seeking to advertise wealth luxury brands earn strictly positive profits under conditions that would with standard formulations of preferences yield marginal cost pricing the authors explore factors that induce veblen effects and they investigate policy implications copyright 1996 by american economic association

desire to acquire powerlessness and compensatory consumption three experiments examine how power affects consumers spending propensities by integrating literatures suggesting that a powerlessness is aversive b status is one basis of power and c products can signal status the authors argue that low power fosters a desire to acquire products associated with status to compensate for lacking power supporting this compensatory hypothesis results show that low power increased consumers willingness to pay for auction items and consumers reservation prices in negotiations but only when products were status related the link between powerlessness and compensatory consumption has broad implications both for consumers health and well being and for understanding the psychological state of power

inventories and sticky prices more on the microfoundations of macroeconomics the role of inventories in making prices sticky is studied by analyzing a dynamic linear quadratic model of a monopoly firm facing stochastic demand but able to store its finished goods in inventory it is shown that in contrast to the usual presumption firms that exhibit the smallest output responses to demand fluctuations may also exhibit the smallest price fluctuations specifically firms which have very flexible inventory storage facilities or are subjected to very transitory demand shocks will rely on inventories as buffers and will change neither production nor price very much on the other hand firms which have very inflexible storage facilities or whose demand shocks are quite permanent will display large swings in both price and output the standard assumption about inventory carrying costs that has been used in the literature that they are linear is shown to imply that production is impervious to fluctuations in demand it is also established that prices may respond more strongly to positive demand shocks than to negative ones if it is impossible to hold negative inventories i e to have unfilled orders the model offers an explanation for stickiness in relative prices however under certain circumstances it may help explain the persistence of inflation this abstract was borrowed from another version of this item

getting ahead of the joneses when equality increases conspicuous consumption among bottom tier consumers it is widely believed that increasing the equality of material possessions or income in a social group should lead people at the bottom of the distribution to consume less and save more however this prediction and its causal mechanism have never been studied experimentally five studies show that greater equality increases the satisfaction of those in the lowest tier of the distribution because it reduces the possession gap between what they have and what others have however greater equality also increases the position gains derived from status enhancing consumption since it allows low tier consumers to get ahead of the higher proportion of consumers clustered in the middle tiers as a result greater equality reduces consumption when consumers focus on the narrower possession gap but it increases consumption when they focus on the greater position gains i e when consumption is conspicuous social competition goals are primed and the environment is competitive

capital controls and international trade finance abstract this paper studies the effects of prohibiting individuals from holding foreign assets but of allowing firms to trade in foreign assets only up to what is needed to finance export and import activities although firms can perform arbitrage between domestic and foreign financial markets the distortions in asset markets are not fully arbitraged away but instead are transmitted to domestic goods markets the dynamics and steady state responses to a variety of shocks are crucially affected by capital controls even in the presence of capital controls the volatility of domestic interest rates can be substantial

non convex costs and capital utilization a study of production scheduling at automobile assembly plants i study detailed data from eleven automobile assembly plants these data display considerable cross plant heterogeneity in production scheduling to explain the observed heterogeneity i solve a dynamic programming model when desired production is below the plant s minimum e cient scale non convexities induce production bunching the plant uses less than full capital utilization on average and production is more volatile than sales when desired production is above the plant s minimum e cient scale the plant operates in a convex region of the cost curve in this case it uses high levels of capital utilization and production is less volatile than sales 2000 elsevier science b v all rights reserved jel classixcation e23 d21 l23

production and inventory control at the general motors corporation during the 1920 s and 1930 s this paper analyzes dynamics of production and inventories at the general motors corporation during the 1920s and 1930s the authors begin by examining anecdotal evidence on the nature of the production control system in force during that period motivated by that evidence they then extend the conventional linear quadratic model of production behavior to take account of annual shutdown finally the authors apply the modified model to newly available data on monthly unit production sales and inventories during 1924 40 general motors appears to have been aiming to maintain a targeted level of inventory relative to expected sales and secondarily to smooth production copyright 1993 by american economic association

financing constraints and inventories abstract this paper investigates the impact of financing constraints on firms inventory and cash management in particular it examines the extent to which the presence of such constraints may account for certain empirical regularities these include e g the excess variance of production vis a vis that of sales as well as the counter cyclicality and persistence of the inventory sales ratio we model the intertemporal decision making on production cash retention and dividends of a firm that is exposed to stochastic demand shocks in every period and faces constrained access to external sources of finance it is found that the presence of financing constraints can explain the excess variance of production in a model which otherwise would not deliver this result moreover as long as demand is positively serially correlated they also contribute to the counter cyclicality and persistence of the inventory sales ratio the paper suggests that financing constraints should not be discarded as a factor driving the cyclical behaviour of inventories