market shares and price quality relationships an econometric investigation of the u s automobile market the objective of this paper is to investigate the role of marketing competition in the northamerican automobile market this is accomplished by estimating a market share demand function the main difficulty with the analysis of demand for automobiles is heterogeneity of model types quality differences among different models both at a point in time and through time cannot be ignored since price and sales depend on them one way to remedy this situation is to apply the hedonic method by regressing the price of a model on its characteristics in this way the implicit prices for each of the qualitative attributes are derived and then used free of quality differences in the second stage estimation of a market share demand function there has been considerable interest in estimating demand functions for automobiles however most of the previous research has focused on total automobile demand in this approach equations on total sales are estimated without taking into account differences in quality characteristics of different model types these studies usually relate the depreciation of the service level of the currently held stock of automobiles to the demand for new stock this leads to a very general stock adjustment 7 or generalized acceleration framework 10 the best known time series studies of the aggregate automobile demand using different variants of this approach are those of chow 2 suits 15 wykoff 19 and westin 18 the estimates of price elasticities from these studies are about 1 and income elasticities range from 1 5 to 4 previous research on automobile demand allowing for qualitative differences in characteristics among different models is much less extensive the most important research effort in this direction is the paper by cowling and cubbin 4 they explained market share movements for different car manufacturers by changes in quality adjusted prices using data from england for the period 1957 1968 their quality adjusted price vector is proxied by the residuals from hedonic price regressions using the data on manufacturer s models the idea that the residuals from the regression of prices of differentiated goods on their qualitative attributes are the quality adjusted prices was suggested by griliches 8 cowling and cubbin used as their quality adjusted price for a specific manufacturing firm the mean residual computed by taking into account all the models offered by

the appraisal of industrial investments a new method and a case study abstract a general method of investment projects evaluation proposed by the second author is outlined it consists in decomposing in period quotas myers adjusted present value the analysis of these quotas provides satisfactory insight into the profitability of the project per se and its profitability through an adequate funding policy a case from real life concerning a large scale industrial investment is briefly discussed and some advantages of the method are highlighted

financial management in inventory problems risk averse vs risk neutral policies abstract in this work we discuss the effect of risk measure selection in the determination of inventory policies we consider an inventory system characterized by the loss function of luciano et al 2003 var as a risk measure for multi period static inventory models international journal of production economics 81 82 375 384 we derive the optimization problems faced by risk neutral quadratic utility mean absolute and cvar decision makers results show that while the global nature of the optimal policy is assured for risk coherent and risk neutral decision makers the convexity of the quadratic utility problem depends on the stochastic properties of demand we investigate the economic and stochastic determinants of the different policies this allows us to establish the conditions under which each type of decision maker is indifferent to imprecision in the distribution families finally we discuss the numerical impact of the choice of the risk measure by means of a multi item inventory the introduction of an approach based on savage scores allows us to offer a quantitative measurement of the similarity discrepancy of policies reflecting different risk attitudes

newsvendor solutions via conditional value at risk minimization abstract in this paper we consider the minimization of the conditional value at risk cvar a most preferable risk measure in financial risk management in the context of the well known single period newsvendor problem which is originally formulated as the maximization of the expected profit or the minimization of the expected cost we show that downside risk measures including the cvar are tractable in the problem due to their convexity and consequently under mild assumptions on the probability distribution of products demand we provide analytical solutions or linear programming lp formulation of the minimization of the cvar measures defined with two different loss functions numerical examples are also exhibited clarifying the difference among the models analyzed in this paper and demonstrating the efficiency of the lp solutions

global sensitivity analysis in inventory management abstract this paper deals with the sensitivity analysis sa of inventory management models when uncertainty in the input parameters is given full consideration we make use of sobol function and variance decomposition method for determining the most influential parameters on the model output we first illustrate the method by means of an analytical example we provide the expression of the global importance of demand holding costs order costs of the harris economic order quantity eoq formula we then present the global sa of the inventory management model developed by luciano and peccati 1999 capital structure and inventory management the temporary sale problem international journal of production economics 59 169 178 for the economic order quantity estimation in the context of the temporary sale problem we show that by performing global sa in parallel to the modeling process an analyst derives insights not only on the eoq structure when its expression is not analytically known but also on the relevance of modeling choices as the inclusion of financing policies and special orders

demand equations for individual new car models estimated using transaction prices with implications for regulatory issues the economic impact of the automobile industry on the u s economy hardly needs to be emphasized taking into account related and feeder industries such as rubber steel zinc it has been estimated that one business in six is automobile related over the last 20 years the auto industry has been subject to increasing regulation laws have been passed which require manufacturers to install certain safety equipment and pollution control equipment and recently have mandated that fuel efficiency cafe standards be met on average by the fleet of cars sold by each manufacturer 2 the impact of these cafe standards is enormous currently the domestic auto manufacturers have plans to spend over 40 billion dollars to essentially redesign all of their models 3 the effects all these regulations have had and will have on the health and structure of the u s automobile industry has been the subject of much debate auto manufacturers have argued that 1 consumers do not value the safety and pollution control equipment and that therefore the expense of such equipment merely hurts their sales 4 and 2 due to the differential ability of the four major auto companies to meet any given standard the imposition of them disrupts the competitive market relationships which exist between the companies advocates of these regulations on the other hand view the u s auto industry as resisting change in order to protect its profits

risk aversion in inventory management traditional inventory models focus on risk neutral decision makers i e characterizing replenishment strategies that maximize expected total profit or equivalently minimize expected total cost over a planning horizon in this paper we propose a framework for incorporating risk aversion in multiperiod inventory models as well as multiperiod models that coordinate inventory and pricing strategies we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk neutral inventory and pricing policies these structural results are extended to models in which the decision maker has access to a partially complete financial market and can hedge its operational risk through trading financial securities computational results demonstrate that the optimal policy is relatively insensitive to small changes in the decision maker s level of risk aversion

evaluation of capital costs in a multi level inventory system by means of the annuity stream principle abstract in this paper some results obtained from applying the annuity stream principle for evaluating capital tied up in inventory and work in progress and presented this principle departs from the cashflows associated with the production inventory processes considered in contrast to traditional procedures by which the inventory value is determined from physical stock evaluated at costs incurred to date in many situations it appears that the traditional procedure will underestimate the amount of capital tied up in production in this paper the two principles are applied to a multi level inventory system and the capital cost expressions and optimal order quantities are compared

finite change comparative statics for risk coherent inventories abstract this work introduces a comprehensive approach to the sensitivity analysis sa of risk coherent inventory models we address the issues posed by i the piecewise defined nature of risk coherent objective functions and ii by the need of multiple model evaluations the solutions of these issues are found by introducing the extended finite change sensitivity indices fcsi s we obtain properties and invariance conditions for the sensitivity of risk coherent optimization problems an inventory management case study involving risk neutral and conditional value at risk cvar objective function illustrates our methodology three sa settings are formulated to obtain managerial insights numerical findings show that risk neutral decision makers are more exposed to variations in exogenous variables than cvar decision makers

average rates of return working capital and npv consistency in project appraisal a sensitivity analysis approach abstract in project appraisal under uncertainty the economic reliability of a measure of financial efficiency such as a rate of return depends on its strong npv consistency meaning that the performance metric i supplies the same recommendation in accept reject decisions as the npv ii ranks competing projects in the same way as the npv iii has the same sensitivity to perturbations in the input data as the npv in real life projects financial efficiency is greatly affected by the management of the working capital using a sensitivity analysis approach and taking into explicit account the role of working capital we show that the average return on investment roi is not strongly npv consistent in accept reject decisions if the working capital is uncertain and changes under changes in revenues and costs also it is not strongly npv consistent in project ranking we also show that the internal rate of return irr is not strongly npv consistent and economic analysis may even turn out to be impossible owing to possible nonexistence and multiplicity caused by perturbations in the input data as well as to possible shifts in the financial meaning of irr under changes in the project s value drivers we introduce the straight line rate of return slrr based on the notion of average rate of change which overcomes all the problems encountered by average roi and irr it always exists is unique strongly npv consistent for both accept reject decisions and project ranking and has an unambiguous financial nature

implication of risk adjusted discount rates on cycle stock and safety stock in a multi period inventory model inventory management is a major area of study in the field of production management and applications often result in major efficiency gains and service level improvements economists believe that inventory levels play a pivotal role in the onset of economic recessions nevertheless financial theories have given only cursory attention to inventory factors the goal of this research is to apply tools of financial economics to address basic issues in inventory management a capital asset pricing model is developed and applied to determine lot size and reorder points from minimizing present value of total cost subject to risk adjusted discount rates

differential importance and comparative statics an application to inventory management abstract in this work we deal with the problem of establishing which parameters impact an inventory policy the most a new sensitivity measure is introduced by relating the differential importance d and the comparative statics cs techniques we discuss the properties of the new indicator and show that it shares the additivity property we provide the expression of for optimization models numerical results are offered for the sensitivity analysis of a recently introduced inventory management model

how elastic is the firm s demand for health insurance abstract we investigate the impact of tax subsidies on the firm s decision to offer insurance and on conditional firm spending on insurance we do so using the micro data underlying the employment cost index which has a major advantage for this exercise the matching of very high quality compensation data with information on a sample of workers in the firm we find that overall there is a moderately sized elasticity of insurance offering with respect to after tax prices 0 25 and a larger elasticity of insurance spending 0 7 we also find that the elasticities are driven primarily by small firms for whom the elasticity is larger and we find that there is significant value added to this employer based data replicating methods from standard micro data sources in our data lead to misleading estimates of these key parameters our simulation results suggest that major tax reform could lead to an enormous reduction in employer provided health insurance spending

price delegation and salesforce contract design with asymmetric risk aversion coefficient of sales agents abstract an important issue that has attracted the interest of academics and practitioners in both marketing and operations is should pricing decisions be made by the firm or delegated to the salesforce this problem has been addressed in the research literature based on the assumption that the exact risk aversion coefficients of the sales agents are known to the firm which may not be true in most applications in this paper we study this problem but assuming that the risk aversion coefficients of agents are private information of the sales agents for both centralized pricing and delegated pricing settings the optimal compensation and pricing contracts are designed and the sensitivity analyses are conducted an interesting finding is that the risk aversion and effort valuation have substitutable impacts on the pricing policy preference of the firm and the agents either strong risk aversion or high effort valuation can drive the firm and the agents to favor centralized pricing over delegated pricing

an eoq model for perishable product with special sale and shortage abstract in this paper for the first time an inventory control model to determine the optimal order and shortage quantities of a perishable item when the supplier offers a special sale is developed four possible cases based on decision that the purchaser might make about the first replenishment policy using regular economic order quantity model at reduced price or regular price if he did not take the special order and coincidence of special period length with positive or negative inventory level of the last regular period length during the special period are investigated moreover several useful theorems are suggested through which one can find closed form solution directly when there are integer operators involved in an objective function at the end in order to illustrate the proposed theorems and the solution method some numerical examples are solved and a sensitivity analysis is reported too

impact of risk aversion on optimal decisions in supply contracts abstract we introduce the concept of conditional value at risk as the evaluation criterion in a supply contract model we first derive the manufacturer s optimal decisions and then analyze the impact of risk aversion on the manufacturer s decisions we follow by conducting numerical experiments to observe how the manufacturer s risk attitude affects his decisions we obtain results that characterize the explicit relationship between the manufacturer s risk attitude and his optimal decisions we also show the dependence of the decision variables on the price and cost parameters which is seldom given in the literature

the implications of job matching for retirement health insurance and leave benefits this paper focuses on potential reasons for variations in benefit packages in particular variations in the availability of retirement health insurance and leave an important feature of our analysis is that we do not start with heterogeneity in workforces to explain fringe benefit differences across employers it would be straightforward to say that differences across employers in fringe benefit packages simply represent differences in the preferences of their workforces rather we focus on heterogeneity across employers as an important source of differences in fringe benefit packages preliminary evidence is found supportive of the predicted differences in the likelihood of such fringe benefits as retirement health insurance and leave based upon two variables the extent of on the job training offered by the employer and the size of the employers we also examine the implied links between these fringe benefits and such variables as average tenture and the proportion of the workforce that is female

var as a risk measure for multiperiod static inventory models abstract this paper explores the possibility to use value at risk var in the context of inventory management var is being used more and more in financial management as a natural measure of the risk taken with a given position in the framework of inventory management it can work as well after having built a decision model where the choice concerns the quantity to be ordered to face a random demand in order to optimize the expected result an expected cost to be minimized or an expected profit to be maximized the model explores the probability distribution of the result both via analytical methods and via simulation methods the analytical exploration of this problem has originated a general method to deduce from inequalities for distribution functions which are based on the expected value related tail inequalities which are particularly useful for var problems where only one tail is involved

costing partial order cycles in the temporary sale price problem the selection of a special order quantity in response to a temporary price reduction is usually derived by comparing the benefits of a special order in terms of a lower purchase price with the additional holding cost if the offer is rejected the analysis is usually carried out over a finite planning horizon under various cost allocation specifications thus neglecting the longer term effects of these offers in contrasting the different solutions this paper shows i that the basic differences among the various earlier formulations centres around the evaluation of the cost of a partial inventory cycle within the average cost avc approach ii that the net present value npv approach eliminates the partial order cycle problem by evaluating cash flows always at the time of occurrence thus obviating the need for considering partial order cycles and iii that the various avc specifications presented in this paper yield excellent approximations to the theoretically correct but harder to use npv formulation numerical examples highlight the main features of the paper

cycles optimization the equivalent annuity and the npv approaches abstract the paper discusses the use of a generalized version of the equivalent annuity principle which takes into account interest rate fluctuations over time when dealing with applications over a sequence of cycles e g plant replacement ones the equivalent annuity is usually defined with reference to each single cycle or to the whole sequence first we study the correspondence between net present values and equivalent annuities as defined above in optimization problems we show that only the second definition is appropriate for optimization whenever the length of the cycle is a choice variable however also the second is not necessarily correct when the horizon is finite then we discuss the corresponding problems of optimality both with an infinite and a finite sequence of cycles applications to a simple plant replacement problem are illustrated they show how different the optimal decisions can be from the equivalent annuity ones

automobiles and implicit markets an estimate of a structural demand model for automobile characteristics economists have always found it difficult to investigate the demand for the automobile good due to its heterogeneity in this paper the automobile is treated as a differentiated product and a two step approach is used to estimate a system of structural demand equations for automobile attributes the obtained results are statistically sound and in conformity with theoretical expectations this should be taken as an indication of the validity and robustness of the procedure used in this analysis

some basic problems in inventory theory the financial perspective the analysis of the standard eoq problem from a financial perspective is proposed the case of mixed financing equity and debt is considered and the results are compared with those stemming from the average cost approach it is shown that no prediction about the result can be made we solve completely the problem of finding the best financing policy as the financial framework suggests to consider an infinity of inventory cycles we investigate the effects on the solution of a more realistic finite truncation of the chain we show that the finite chain solution is always smaller than the infinite chain one

capital structure and inventory management the temporary sale price problem the paper discusses the use of adjusted present value techniques in a problem of inventory management the temporary sale price problem in the presence of equity or debt financing while traditional net present value approaches produce results very similar to those of the average cost approach our consideration of the capital structure of the firm opens the way to theoretically and numerically different inventory policies