the fisher hypothesis and the forecastability and persistence of inflation abstract for the period 1860 to 1939 the simple correlation of the u s commercial paper rate with the contemporaneous inflation rate is 0 17 the corresponding correlation for the period 1950 to 1979 is 0 71 this paper attributes this apparent change in the fisher relation to differences in the stochastic process of inflation rather than a change in any structural relationship between interest rates and expected inflation contrary to recent claims in the literature there is little evidence of inflation non neutrality in data from the pre world war i period

behavioral demand effects when buyers anticipate inventory shortages abstract firms often worry about how buyers will react when there is an inventory shortage but the anticipation of facing a shortage may also impact buyer behavior in this paper we use a combination of theoretical modeling computational methods and laboratory experiments to understand buyers search behavior in markets where there is potential for either a costly or costless inventory shortage when inventory shortages are costly to buyers we find their equilibrium purchasing strategy generates a newsvendor problem among the firms in turn experimental data suggests buyer behavior can be explained by prospect theory better than by standard assumptions of fully rational expected utility maximizing agents indicating that potential inventory shortages generate loss aversion among buyers and there is systematic mis identification of the probability with which they will be able to procure an item using computational methods we find firms are able to extract more surplus from behavioral buyers via higher prices than would be predicted by the standard model on the other hand when inventory shortages are not costly to buyers the effect of behavioral biases on the part of buyers is not relevant but in this case there can be a benefit to reducing inventory via a reduction in price competition

pricing and lot sizing decisions for perishable goods when demand depends on selling price reference price product freshness and displayed stocks abstract price is an important factor affecting demand rate based on economic and marketing theory in addition today s health conscious consumers prefer a product further from its expiration date because it is fresher and can be stored longer furthermore a large display of goods in a supermarket induces customers to buy more due to its visibility variety and seasonality as a result we develop a joint pricing and lot sizing model for retailers selling perishable products in which the demand depends on not only the selling price and reference price but also the product freshness linked to expiration date and displayed stock level we then formulate the problem as a deterministic model in which the retailer determines the optimal selling prices and ending inventory levels to maximize the discounted total profit furthermore we discuss the retailer s optimal decisions under two scenarios of demand behavior loss neutrality and loss aversion our theoretical analysis shows that the optimal pricing and ending inventory level strategies are both monotonic in time and the equilibrium of the system is unique for these two scenarios of demand behavior finally a set of structural properties and sensitivity analysis is also developed to characterize the impacts of model parameters on the optimal decisions

optimal ordering and pricing policies in a single period environment with multivariate demand and markdowns this paper investigates a single period inventory model in which the demand of the product is a deterministic multivariate function of price time and level of inventory models are formulated for the basic pricing case and the case with a price markdown during the season solution methodologies are presented for each case when the pricing decisions are predetermined and when they are decision variables comments on the practical use of this model are presented and sensitivity analysis is conducted on the decision variables and demand parameters

optimal dynamic pricing for deteriorating items with reference price effects when inventories stimulate demand abstract in this paper we incorporate reference price effects into a deteriorating inventory problem when the demand rate depends on displayed stock level and selling price simultaneously reference price effects are formed empirically by customers to adjust current price perception on the basis of past purchases the market demand is assumed to be responsive to the difference between the current selling price and the reference price which is perceived as a loss or a gain we consider three scenarios of market demand loss neutrality loss aversion and loss seeking an optimal dynamic pricing model is established to determine a pricing strategy maximizing the discounted total profit over an infinite time horizon theoretical results are derived to demonstrate the existence of the optimal solutions and to explore the relationships between optimal pricing decisions and an initial reference price based on mild assumptions numerical example and sensitivity analysis are presented to illustrate the theoretical results and managerial insights finally concluding remarks are offered

dynamic pricing strategies with reference effects we consider the dynamic pricing problem of a monopolist firm in a market with repeated interactions where demand is sensitive to the firm s pricing history consumers have memory and are prone to human decision making biases and cognitive limitations as the firm manipulates prices consumers form a reference price that adjusts as an anchoring standard based on price perceptions purchase decisions are made by assessing prices as discounts or surcharges relative to the reference price in the spirit of prospect theory we prove that optimal pricing policies induce a perception of monotonic prices whereby consumers always perceive a discount respectively surcharge relative to their expectations the effect is that of a skimming or penetration strategy the firm s optimal pricing path is monotonic on the long run but not necessarily at the introductory stage if consumers are loss averse we show that optimal prices converge to a constant steady state price characterized by a simple implicit equation otherwise the optimal policy cycles the range of steady states is wider the more loss averse consumers are steady state prices decrease with the strength of the reference effect and with customers memory all else equal offering lower prices to frequent customers may be suboptimal however if these are less sensitive to price changes than occasional buyers if managers ignore such long term implications of their pricing strategy the model indicates that they will systematically price too low and lose revenue our results hold under very general reference dependent demand models

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

an inventory model under inflation for deteriorating items with stock dependent consumption rate and partial backlogging shortages abstract in this paper we extend teng j t chang h j dye c y hung c h 2002 an optimal replenishment policy for deteriorating items with time varying demand and partial backlogging operations research letters 30 6 387 393 and hou k l 2006 an inventory model for deteriorating items with stock dependent consumption rate and shortages under inflation and time discounting european journal of operational research 168 2 463 474 by considering an inventory lot size model under inflation for deteriorating items with stock dependent consumption rate when shortages are partial backlogging the proposed model allows for 1 partial backlogging 2 time varying replenishment cycles and 3 time varying shortage intervals consequently the proposed model is in a general framework that includes numerous previous models as special cases we then prove that the optimal replenishment schedule exists uniquely and provide a good estimate for finding the optimal replenishment number furthermore we briefly discuss some special cases of the proposed model related to previous models finally numerical examples to illustrate the solution process and some managerial implications are provided

an eoq model for perishable items under stock dependent selling rate and time dependent partial backlogging in the present paper we extend padmanabhan and vrat s model by proposing a time proportional backlogging rate to make the theory more applicable in practice the existence and uniqueness of the solutions of the relevant systems are examined subsequently a numerical example is presented to illustrate the application of developed model

keynesian and monetarist theories of the monetary transmission process doctrinal aspects abstract this paper investigates the doctrinal link underlying differences between keynesian and monetarist approaches regarding the transmission mechanism of monetary policy consideration of the post general theory literature reveals that a key aspect of that link concerns the velocity of circulation of money the keynesian emphasis on compartmentalizing the demand for money into active and idle components resulted in a mechanical interpretation of velocity and the associated view that money does not matter the monetarist tradition illustrates the behavioral perspective adduced to velocity via adaptive price expectations by earlier quantity theorists leading to a capital theoretic reformulation of the quantity theory in terms of a stable demand function for money

an inventory model with both stock dependent demand rate and stock dependent holding cost rate abstract in this paper we develop an inventory model under a stock dependent demand rate and stock dependent holding cost rate with relaxed terminal conditions shortages are allowed and partially backlogged in the model the purpose of this study is to determine the optimal order quantity and the ending inventory level such that the total profit per unit time is maximized for the retailer we first establish a proper model for a mathematical formulation then we develop several theoretical results and provide the decision maker with an algorithm to determine the optimal solution finally numerical examples are provided to illustrate the solution procedure and a sensitivity analysis of the optimal solution with respect to major parameters is carried out

the s l debacle public policy lessons for bank and thrift regulation this book describes the period of failures of savings and loan associations and sets out a program of policies to prevent future debacles it explains the regulatory actions and inactions that created the incentives for large numbers of thrifts to make excessively risky and ill conceived and in some cases fraudulent and criminal investments it describes the failure of the accounting system to provide adequate information to regulators and in many cases even to the managers of the thrifts themselves concerning the health and riskiness of individual thrifts it also discusses how the regulatory system that had been conceived in an earlier and highly regulated era was overwhelmed in the deregulated environment of the early 1980s it shows how the reforms that were made in response to the growing crisis were too little and too late and finally it offers a set of policy reforms that could prevent future crises in the savings and loan industry this work should be of interest to political and financial economists

the role of the gold standard in keynesian monetary theory i introduction the primary motivation for this paper was provided by ambiguities within the general theory regarding the efficacy of monetary policy remedies to a depression i will argue that rather than being a fixed price or depression model the general theory is best thought of as a gold standard model thus i show that keynes s statements on monetary policy ineffectiveness implicitly assumed the existence of a monetary system with some linkage to gold and that some of the general theory s most distinctive features make more sense if viewed from that perspective this hypothesis may appear surprising in light of the popular perception that in the general theory keynes tried to move away from the open economy international gold standard framework employed in the treatise on money i will argue that he failed to do this even if keynes did not explicitly regard the general theory as a gold standard model during the 1930s he began to view the economic problems that we associate with the gold standard monetary policy ineffectiveness occasional episodes of deflation and so on as being inherently characteristic of a modern capitalist economy ironically keynes made this change just as many countries were beginning to deemphasize the role of gold keynes is regarded as one of the most severe critics of an international gold standard with rigid parities thus it is odd that he would develop a monetary ineffectiveness proposition that has little or no applicability to a country operating under a fiat money regime an essential part of my argument will be to show that keynes viewed a pure fiat regime as being both highly unlikely and highly undesirable an important implication of this paper is that the gradual replacement of the gold standard by fiat money regimes should have led modern keynesian economists to move away from some of the most distinctive features of 1930s keynesianism such as monetary policy ineffectiveness deficit spending the paradox of thrift and protectionism i will show that the recent metamorphosis of new keynesian macroeconomics represents a natural response of economists to a radically altered monetary environment ii keynes s views on monetary policy to better understand the role played by the gold standard in keynes s work it will be helpful to start with the monetary ineffectiveness proposition in current usage this phrase generally refers to the new classical view that money has no impact on real output in contrast most would interpret the pessimistic views expressed by keynes during the 1930s as reflecting a belief that monetary expansion might be incapable of increasing nominal output because keynes clearly did not believe that an expansionary monetary policy would reduce real output this interpretation suggests that keynes viewed the ineffectiveness proposition as also applying to the price level unfortunately there is great uncertainty as to how pessimistic keynes actually was regarding the effectiveness of monetary policy the 31 december 1933 issue of the new york times times p 2xx published a long letter by keynes in which he evaluated the first year of the new deal after a lengthy critique of the national recovery act keynes turned his attention to roosevelt s gold buying program 1 the other set of fallacies arises out of a crude economic doctrine commonly known as the quantity theory of money rising output and rising incomes will suffer a setback sooner or later if the quantity of money is rigidly fixed some people seem to infer from this that output and income can be raised by increasing the quantity of money but this is like trying to get fat by buying a larger belt this is a clear example of what is often referred to as the pushing on a string view of monetary policy ineffectiveness but notice how keynes subtly shifts his argument in the very next paragraph as he turns from money s effect on real output to its effect on prices it is an even more foolish application of the same ideas to believe that there is a mathematical relation between the price of gold and the price of other things

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

who anticipated the great depression gustav cassel versus keynes and hayek on the interwar gold standard the intellectual response to the great depression is often portrayed as a battle between the ideas of friedrich hayek and john maynard keynes yet both the austrian and the keynesian interpretations of the depression were incomplete austrians could explain how a country might get into a depression bust following a credit fueled investment boom but not how to get out of one liquidation keynesians could explain how a country might get out of a depression government spending on public works but not how it got into one animal spirits by contrast the monetary approach of gustav cassel has been ignored as early as 1920 cassel warned that mismanagement of the gold standard could lead to a severe depression cassel not only explained how this could occur but his explanation anticipates the way that scholars today describe how the great depression actually occurred unlike keynes or hayek cassel analyzed both how a country could get into a depression deflation due to tight monetary policies and how it could get out of one monetary expansion

a model for optimizing retail space allocations the allocation of scarce shelf space among competing products is a central problem in retailing space allocation affects store profitability through both the demand function where both main and cross space elasticities have to be considered and through the cost function procurement carrying and out of stock costs a model is developed which uniquely incorporates both effects a case study is used to estimate the parameters and the problem is solved within a geometrical programming framework an extensive comparison with alternative procedures suggests this general model leads to significantly different allocation rules and superior profit performance

newsvendor problem with clearance pricing abstract the newsvendor nv problem assumes that the salvage clearance price at which the leftover inventory is disposed of is a given parameter of the problem in this paper we relax this assumption and consider the nv problem with the salvage clearance price as a decision variable we have drawn from the literatures on the nv problem and clearance markdown dynamic pricing to develop three stochastic models in this paper in the first model we assume that while the seasonal demand is exogenous and stochastic the end of season demand is endogenous and deterministic the second model extends the first model by assuming that the end of season demand is endogenous and stochastic finally the third model considers that both the seasonal and end of season demands are endogenous and stochastic we have provided solution procedures for solving the stochastic optimization problems we have also performed sensitivity analyses to assess the sensitivity of the optimal expected profit and order quantity to different problem parameters specifically we have found that the optimal expected profit is most sensitive to the variable cost per unit mean seasonal demand and market potential of end of season demand our models will be useful for retailers of products with a short selling season and a short end of season period for clearance sale of leftover inventory such that there is a single replenishment opportunity at the beginning of the season and a single opportunity for setting the salvage price for clearance sale based on the leftover inventory and end of season demand pattern the paper is concluded with possible directions for future research

explicit solutions of optimization models and differential games with nonsmooth asymmetric reference price effects models in marketing with asymmetric reference effects lead to nonsmooth optimization problems and differential games which cannot be solved using standard methods in this study we introduce a new method for calculating explicitly optimal strategies open loop equilibria and closed loop equilibria of such nonsmooth problems application of this method to the case of asymmetric reference price effects with loss aversive consumers leads to the following conclusions 1 when the planning horizon is infinite after an introductory stage the optimal price stabilizes at a steady state price which is slightly below the optimal price in the absence of reference price effects 2 the optimal strategy is the same as in the symmetric case but with the loss parameter determined by the initial reference price 3 competition does not change the qualitative behavior of the optimal strategy 4 adopting an appropriate constant price strategy results in a minute decline in profits

efficient algorithms for the dynamic pricing problem with reference price effect we analyze a finite horizon dynamic pricing model in which demand at each period depends on not only the current price but also past prices through reference prices a unique feature but also a significant challenge in this model is the asymmetry in reference price effect which implies that the underlying optimization problem is nonsmooth and no standard optimization methods can be applied we identify a few key structural properties of the problem which enable us to develop strongly polynomial time algorithms to compute the optimal prices for several plausible scenarios we complement our exact algorithms by proposing an approximation heuristic and provide an upper bound on the optimal objective value finally we conduct numerical experiments to study the optimal price path and demonstrate the value of dynamic pricing when demands are seasonal we further compare numerically one of the exact algorithms with the heuristic and offer managerial suggestions this paper was accepted by yinyu ye optimization

eoq models for perishable items under stock dependent selling rate this paper presents inventory models for perishable items with stock dependent selling rate the selling rate is assumed to be a function of current inventory level and rate of deterioration is taken to be constant under instantaneous replenishment with zero lead time the model incorporates aspects such as complete partial and no backlogging eoq is determined for maximizing the total profit in each of the situations the models developed are illustrated through numerical examples and sensitivity analysis is reported

the impact of reference price effects on the profitability of price promotions this paper investigates the impact of reference price effects on retailer price promotions and describes why these effects can make promoting profitable first we analyze the profit impact of reference price effects generated by a single period of promotion the promotion can increase profit if the gain that these effects create in the promotion period outweighs the loss they create in future periods we then describe how retailers can estimate the optimal strategy of recurring promotions that maximizes profits from reference price effects over a time horizon examples of such strategies are presented for a retailer selling a national brand of peanut butter we obtain insights into how promotion prices timing and profits are affected by changes in costs interest rates consumers reactions to reference price effects and error in estimates used in the model the retailer s optimal reaction to a trade deal is also examined this strategy involves a phase of increased promotion activity sandwiched between phases of decreased activity we explain these results using the effects described in the single period model

technical note dynamic pricing with gain seeking reference price effects we study a dynamic pricing problem of a firm facing reference price effects at an aggregate demand level where demand is more sensitive to gains than losses we find that even the myopic pricing strategy belongs to one type of discontinuous maps which can exhibit complex dynamics over time our numerical examples show that in general the optimal pricing strategies may not admit any simple characterizations and the resulting reference price price dynamics can be very complicated we then show for a special case that a cyclic skimming pricing strategy is optimal and we provide conditions to guarantee the optimality of high low pricing strategies

stack them high let em fly lot sizing policies when inventories stimulate demand in some retail contexts stocking large quantities of inventory may not only improve service levels but can also stimulate demand for products having demand rates that increase with inventory levels we analyze the effect of stocking decisions on firm profitability to develop managerial insights regarding the structure of the optimal inventory policy and to understand how this policy differs from traditional approaches when inventories stimulate demand iteratively applying the standard economic order quantity eoq model by setting the demand rate parameter equal to the observed average demand rate in prior cycles yields an equilibrium order quantity that is robust to demand parameter misestimation but is suboptimal the profit maximizing policy orders larger quantities and can replenish inventory even before on hand stock fully depletes using an extension of a standard inventory dependent demand model from the literature we first provide a convenient characterization of products that require early replenishment we demonstrate that the optimal cycle time is largely governed by the conventional trade off between ordering and holding costs whereas the reorder point relates to a promotions oriented cost benefit perspective we show that the optimal policy yields significantly higher profits than cost based inventory policies underscoring the importance of profit driven inventory management

how good is the market at assessing bank fragility a horse race between different indicators abstract we explore for individual banks active in the east asian countries during the years 1996 1998 the performance of three sets of indicators of bank fragility that can be computed from publicly available information accounting data stock market prices and credit ratings we find significantly different patterns among the three groups of indicators in their ability of forecasting financial distress at a specific point in time and over time more specifically in the east asia crisis episode the information based on stock prices or on judgmental assessments of credit rating agencies did not outpace backward looking information contained in balance sheet data stock market based information though has responded more quickly to changing financial conditions than ratings of credit risk agencies overall the evidence supports the policy conclusion that where the information processing is quite costly as in most developing countries it is important to use simultaneously a plurality of indicators to assess bank fragility

the politics of bank failures evidence from emerging markets this paper studies large private banks in 21 major emerging markets in the 1990s it first demonstrates that bank failures are very common in these countries about 25 percent of these banks failed during the seven year sample period the paper also shows that political concerns play a significant role in delaying government interventions to failing banks failing banks are much less likely to be taken over by the government or to lose their licenses before elections than after this result is robust to controlling for macroeconomic and bank specific factors a new party in power early elections outstanding loans from the imf as well as country specific time independent factors this finding implies that much of the within country clustering in emerging market bank failures is directly due to political concerns

politicians and banks political influences on government owned banks in emerging markets abstract government ownership of banks is very common in countries other than the united states this paper provides cross country bank level empirical evidence about political influences on these banks it shows that government owned banks increase their lending in election years relative to private banks this effect is robust to controlling for country specific macroeconomic and institutional factors as well as bank specific factors the increase in lending is about 11 of a government owned bank s total loan portfolio or about 0 5 of the median country s gdp per election per government owned bank

optimal joint dynamic pricing advertising and inventory control model for perishable items with psychic stock effect abstract in this study a joint pricing advertising and inventory control problem will be investigated for a firm selling perishable products with psychic stock effect the proposed problem is analyzed in the deterministic multi period setting in which demand at each period depends on not only the amount of inventory displayed and advertising goodwill affected by the firm s current and past advertising efforts but also selling price and freshness index the objective is to determine the optimal pricing advertising and psychic stock strategies maximizing the discount total profit over the infinite planning horizon our theoretical results prove that the firm would adopt a static pricing strategy and then demonstrate that the optimal paths of the advertising goodwill and psychic stock can be determined uniquely we also show that the convergence of the advertising goodwill towards its equilibrium is from above or below depending on the relative location of the initial stock of advertising goodwill with respect to the unique equilibrium stock of advertising goodwill moreover a set of structural properties is developed to explore the relationships among the optimal decisions finally the concluding remarks and suggestions will be provided for future studies

dynamic pricing with loss averse consumers and peak end anchoring we study the dynamic pricing implications of a new behaviorally motivated reference price mechanism based on the peak end memory mode this model suggests that consumers anchor on a reference price that is a weighted average of the lowest and most recent prices loss averse consumers are more sensitive to perceived losses than gains relative to this reference price we find that a range of constant pricing policies is optimal for the corresponding dynamic pricing problem this range is wider the more consumers anchor on lowest prices and it persists when buyers are loss neutral in contrast with previous literature in a transient regime the optimal pricing policy is monotone and converges to a steady state price which is lower the more extreme and salient the low price anchor is our results suggest that behavioral regularities such as peak end anchoring and loss aversion limit the benefits of varying prices and caution that the adverse effects of deep discounts on the firm s optimal prices and profits might be more enduring than previous models predict