sensitivity of optimal programs with respect to changes in target stocks the case of irreversible investment abstract consider an aggregative model of economic growth with changing technology and tastes in which investment is irreversible it is shown that initial decisions in finite horizon optimal programs are insensitive to changes in terminal stocks provided the horizon is long enough this generalizes brock s result which was proved assuming investment to be reversible the irreversibility constraint does not allow one to follow brock s method of proof using the dual shadow price properties of optimal programs an alternative method of proof is developed using a primal approach and exploiting dynamic programming arguments

procedural unfair wage differentials and their effects on unethical behavior in this paper we investigate how payment procedures that are deemed unfair can spur unethical behavior towards innocent coworkers in a real effort experiment in our discrimination treatment a highly unfair payment procedure with wage differentials half the workforce is randomly selected and paid by relative performance whereas the remaining receives no payment a joy of destruction game measures unethical behavior subsequently non earners in discrimination destroy significantly more than in the non discriminatory control treatments in discrimination unethical behavior is generally high for all non earners independent of individual inequality aversion and relative performance beliefs in the control treatments inequality aversion is the main driver of destructive behavior

multiperiod sales production decisions under uncertainty abstract this paper studies the behavior of an expected profit maximizing multiperiod firm under uncertainty in output and demand the firm s problem is to determine in each period the level of sales and inventory and the expected output for the coming period the optimal policy is derived in an explicit closed form and is proved to be myopic it is shown that the observed phenomenon of downward price inflexibility can be explained and further specified by using the results of our model

a glimpse through the veil of ignorance equality of opportunity and support for redistribution abstract this study is an experimental investigation into preference for redistribution of income it had been hypothesized that belief in equality of opportunity in a society diminishes support for the welfare state this could potentially explain the low taxes and social benefits in the united states vis a vis europe to verify this hypothesis participants in an experiment were assigned different probabilities of winning and matched in groups of four next before finding out who would actually win they selected preferred transfers to be paid by the winners to the group as a whole it was found that the average transfers were about 20 lower in the sessions in which winning was determined by performance in a task rather than by sheer luck this difference cannot be explained by overconfidence in predicting own score it corroborates the conjecture that perceived determinants of success i e whether poverty results from laziness or bad luck affect the support for redistribution on the other hand greater inequality of opportunity measured simply by dispersion of probabilities of winning within a group did not lead to higher transfers

fairness in public good provision an investigation of preferences for equality and proportionality a binary public good voting mechanism is designed to test for preferences for income equality and cost benefit proportionality the voting design isolates preferences for equality from those for proportionality and controls for alternative external preferences such as altruism envy and the rawlsian difference principle individuals choose between greater income or fairness in these demand revealing votes treatments vary whether the positions of voters are earned or random whether votes are hypothetical or real and whether they are over gains or losses significant deviations from self interested voting are observed in all treatments testing for equality and in some treatments testing for proportionality

stochastic dynamic models with stock dependent rewards abstract we examine the behavior of optimal consumption and investment policies in aggregate stochastic growth models when utility depends on both consumption and the stock level such models arise in the study of renewable resources monetary growth and growth with public capital conditions are given which guarantee that optimal policies are monotonic the limiting behavior of the optimal consumption investment and output processes is characterized

stochastic comparisons in production yield management manufacturing firms routinely commit resources to increase yield rates through product and process improvement initiatives champions of such yield improvement projects may assume that stochastically larger yield rates are beneficial in this note we show that this need not hold even when the contingent production lot sizes are chosen optimally we employ stochastic comparison techniques to show that a yield rate that is smaller in the convex order ensures higher expected profit and we provide a distribution free bound on the size of increase in expected profit we also identify properties of yield rate distributions that do make stochastically larger yield rates beneficial

a periodic review production planning model with uncertain capacity and uncertain demand optimality of extended myopic policies increasing product complexity manufacturing environment complexity and an increased emphasis on product quality are all factors leading to uncertainties in production processes these uncertainties are in the form of unplanned machine maintenance varying production yields and rework among others in planning for production an adequate model must incorporate these uncertainties into the representation of the production process this paper treats the aggregate planning problem for a single product with random demand and random capacity in the single period problem random capacity does not affect the optimal policy but results in a unimodal nonconvex cost function in the multiple period and infinite horizon settings order up to policies that are dependent on the distribution of capacity are shown to be optimal in spite of a nonconvex cost in the infinite horizon setting an intuitive description of the situation leads to the notion of a class of extended myopic policies requiring the consideration o

product portfolio management with production flexibility in agribusiness the acquisition of production flexibility is a well documented strategy pursued by many firms to counteract certain operational constraints however these flexibilities can increase the complexity of a production system and the difficulties in managing increased complexity may hinder exploiting the full benefit of flexibility in this paper we consider one such flexibility paradox at an agribusiness firm for an annual 800 million production decision the firm produces a number of products hybrid seeds using limited inventories of several raw materials parent seeds and a production process that is subject to random variations to handle the raw material availability constraint and to partially mitigate the supply risk the firm invests in a costly second production in south america that can be used if the yield in the first production in north america is low we solve this joint problem of raw material allocation and sequential production by reformulating it as a tractable simultaneous optimization

the structure of periodic review policies in the presence of random yield this work provides a comprehensive analysis of a general periodic review production inventory model with random variable yield existence of an order point whose value does not depend on yield being random is proved in the single period case without specifying the yield model and using a very general cost structure when yield is a random multiple of lot size the nonorder up to optimal policy is characterized for a finite horizon model the finite horizon value functions are shown to converge to the solution of an infinite horizon functional equation and the infinite horizon order point is shown to be no smaller than when yield is certain

an approximate policy for a dual sourcing inventory model with positive lead times and binomial yield this paper studies the inventory system of a retailer who orders his products from two supply sources a local one that is responsive and reliable but expensive and a global one that is low cost but less reliable the deliveries from the global source only partially satisfy the quality requirements we model this situation with a dual sourcing inventory model with positive lead times and random yield we propose a dual index order up to policy dop based on approximating the inventory model with an unreliable supplier by a sequence of dual sourcing models with reliable suppliers and suitably modified demand distributions numerical results show that the performance of this heuristic is close to that of the optimal dop moreover we extend the heuristic to models with advance yield information and study its impact on the total inventory costs

just luck an experimental study of risk taking and fairness choices involving risk significantly affect the distribution of income and wealth in society this paper reports the results of the first experiment to our knowledge to study fairness views about risk taking specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes we find that even though many participants focus exclusively on ex ante opportunities most favor some redistribution ex post many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices these findings apply to both stakeholders and impartial spectators

a complete characterization of optimal growth paths in an aggregated model with a non concave production function the convexity of technology has played a crucial role in economic analyses of optimal one sector growth problems for example two of the key results on the traditional model of ramsey 1928 that have relied on the convexity of the technology are that optimal intertemporal growth involves moving monotonically towards a unique steady state as in cass 1965 koopmans 1965 and that the value function is a concave differentiable function of the initial capital stock as in benveniste and scheinkman 1979

a periodic review lot sizing problem with random yields disruptions and inventory capacity this paper examines a periodic reviewed lot sizing problem with random yields disruptions and limited inventory capacity to characterise the continuous production an additive random yield model is considered rather than a multiplicative one disruptions cause breakdowns to production inventory capacity is included since the production has to be shut down when the inventory buffer is full both disruptions and shutdowns lead to a start up cost and a stochastic lead time to recover the production these compound factors of uncertainty are encountered in practical planning decisions in process industries we review the existing random yield models which are then compared with the additive model with a linear production cost the additive model has an order up to policy to be optimal disruptions deteriorate the expected actual production quantity and the fill rate dramatically even though the optimal order up to level increases compared with the cases of no disruption considering inventory capacity makes the problem to be a non convex dynamic programming problem numerical analysis shows that the performance is dramatically deteriorated when the inventory capacity is rather tight which indicates the importance of selecting a proper inventory capacity to reduce the negative impacts and avoid redundant investment on capacity moreover the start up cost plays an important role in determining the level of inventory capacity

irreversibility and the behavior of aggregate stochastic growth models abstract this paper examines the effects of capital restrictions on aggregate stochastic growth models in a one sector model irreversibility of investment reduces the response of investment to positive shocks to the economy in real business cycle models irreversibility lowers the variation of output investment and hours worked the magnitude of the effects depends on the variance and autocorrelation of productivity shocks in a two sector model constraints on the movement of capital across sectors are more important than depreciation constraints there is evidence that immobility of capital has a significant impact on the sectoral variability of production and hours worked

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

when is inequality fair an experiment on the effect of procedural justice and agency abstract we investigate how the perceived fairness of an income distribution depends on the beliefs about the process that generates the inequality specifically we examine how two crucial features of this process affect fairness views 1 procedural justice equal treatment of all 2 agency one s ability to determine his her income we do this in a lab experiment by differentially varying subjects ability to influence their earnings comparison of ex post redistribution decisions of total earnings under different conditions indicate both agency and procedural justice to matter for fairness highlighting the importance of agency we observe lower redistribution of unequal earnings resulting from risk when risk is chosen freely highlighting the importance of procedural justice we find introduction of inequality of opportunity to significantly increase redistribution despite this increase under inequality of opportunity the share of subjects redistributing none remain close to the share of subjects redistributing fully revealing an underlying heterogeneity in the population about how fairness views should account for inequality of opportunity

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

luck choice and responsibility an experimental study of fairness views this is a pre copyedited author produced pdf of an article accepted for publication in journal of public economics following peer review

stochastic growth with irreversible investment abstract this paper provides a unified treatment of the theory of optimal growth when investment is irreversible and output from production is uncertain under a convex technology and fairly general assumptions on the random environment it is shown that optimal policies are monotonic and converge to a unique limiting distribution which is independent of the initial stock the paper concludes with a comparison of optimal policies in the presence and absence of irreversibility

myopic heuristics for the random yield problem we consider a single item periodic review inventory problem with random yield and stochastic demand the yield is proportional to the quantity ordered with the multiplicative factor being a random variable the demands are stochastic and are independent across the periods but they need not be stationary the holding penalty and ordering costs are linear any unsatisfied demands are backlogged two cases for the ordering cost are considered the ordering cost can be proportional to either the quantity ordered e g in house production or the quantity received e g delivery by an external supplier random yield problems have been addressed previously in the literature but no constructive solutions or algorithms are presented except for simple heuristics that are far from optimal in this paper we present a novel analysis of the problem in terms of the inventory position at the end of a period this analysis provides interesting insights into the problem and leads to easily implementable and highly accurate myopic heuristics a detailed computational study is done to evaluate the heuristics the study is done for the infinite horizon case with stationary yields and demands and for the finite horizon case with a 26 period seasonal demand pattern the best of our heuristics has worst case errors of 3 0 and 5 0 and average errors of 0 6 and 1 2 for the infinite and finite horizon cases respectively

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

agenda control and reciprocity in sequential voting decisions we study how reciprocity affects the extent to which a chair can exploit her control over an agenda if a committee votes sequentially on a known series of binary proposals we show in a parsimonious laboratory experiment that committee members form vote trading coalitions favoring early proposals not only when the sequence of proposals is exogenously given but also when a chair controls the sequence of proposals vote trading occurs even though chairs manipulate the agenda in their favor punishment for chairs exploiting agenda control is weak as chairs reciprocate support by others more frequently than nonchairs jel c92 d71 d72

turnpike theorems in nonconvex nonstationary environments this paper provides a comprehensive development of turnpike theory in a stochastic aggregative model with time varying nonconvex technology a new approach to turnpike theorems is developed that exploits the monotonicity of optimal programs and utilizes a supermartingale process generated by stochastic euler equations this extends the classical turnpike theory to general nonconvex nonstationary environments copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

preferences for redistribution in the land of opportunities this paper explores how individual preferences for redistribution depend on future income prospects in addition to estimating the impact of individuals socioeconomic background and of their subjective perceptions of future mobility we employ panel data to construct dobjectivet measures of expected gains and losses from redistribution for different categories of individuals we find that such measures have considerable explanatory power and perform better than dgeneral mobilityt indexes we also find that preferences for redistribution respond to individual beliefs on what determines one s position in the social ladder ceteris paribus people who believe that the american society offers equal opportunities are more averse to redistribution d 2004 published by elsevier b v

concepts for safety stock determination under stochastic demand and different types of random production yield abstract we consider a manufacturer s stochastic production inventory problem under periodic review and present methods for safety stock determination to cope with uncertainties that are caused by stochastic demand and different types of yield randomness following well proven inventory control concepts for this problem type we focus on a critical stock policy with a linear order release rule a central parameter of this type of policy is given by the safety stock value when non zero manufacturing lead times are taken into account in the random yield context it turns out that safety stocks have to be determined that vary from period to period we present a simple approach for calculating these dynamic safety stocks for different yield models additionally we suggest approaches for determining appropriate static safety stocks that are easier to apply in practice in a simulation study we investigate the performance of the proposed safety stock variants

understanding investment irreversibility in general equilibrium miquel faig i introduction many forms of investment are irreversible a growing body of literature 1 has shown that irreversibility is important for firms investment decisions under uncertainty however we still know little about the consequences of investment irreversibility for the economy as a whole that is in general equilibrium learning about these consequences is not only important for a better understanding of capital accumulation it is also important for an understanding of the information that asset returns provide about the business cycle in fact recent papers by boldrin christiano and fisher 1995 beaudry and guay 1996 and jermann 1998 convincingly argue that impediments to the reallocation of capital are crucial to generate realistic dynamics for asset returns thus understanding the general equilibrium consequences of investment irreversibility is important to the theories of economic growth the business cycle and asset pricing in this article i advance an analytically tractable model to explore the consequences of investment irreversibility in general equilibrium the main contribution of this model to the existing literature is analytical tractability analytical results from the literature dealing with investment irreversibility in general equilibrium are scarce and mainly limited to general properties such as existence of solutions as in sargent 1980 and olson 1989 fortunately thanks to numerical simulations we know some of the effects of investment irreversibility in general equilibrium for example using an extension to the neoclassical growth model coleman 1997 documents that irreversibility significantly affects interest rates and it may increase aggregate investment even when no constraints are binding 2 in contrast firms behavioral analyses and the related competitive equilibrium model by leahy 1993 show that irreversibility typically discourages capital creation the model advanced in this paper helps to understand and to formalize why such contrast exists the model of this article extends the endogenous growth model found in barro 1990 the four main assumptions of the model are the following all production processes yield the same output which can be consumed or invested in many types of capital all factors of production are a type of capital the aggregate production function yields constant returns to scale preferences are homothetic and modeled along the lines of epstein and zin 1989 these preferences include as a special case the standard isoelastic time additive preferences but they allow to distinguish between the inter temporal elasticity of substitution and the inverse of the coefficient of relative risk aversion these two parameters play important and distinct roles in the analysis to attain strong analytical results the model in this article has to adopt the restrictive assumption that all factors of production are a form of capital however the model remains quite flexible to capture important elements of reality the model allows for many types of capital so some of them can be interpreted as human capital also the model allows great flexibility on the stochastic shocks affecting the production possibilities of the economy finally the model allows for the coexistence of irreversible and flexible types of capital with or without complementarities between them this diversity of capital types is important to generate endogenous interest rates and endogenous marginal products of capital also capital diversity allows for strongly binding irreversibility constraints even with positive gross investment as it has always been the model reveals that in general equilibrium there are three effects of irreversibility on aggregate investment the first is the obvious direct effect of preventing capital destruction in periods one may wish to consume part of the capital stock

equity responsibility and the cultural dimension we present questionnaire studies concerning equity judgments based on an axiom that underlies rawls s difference principle our investigation spanning over a period of fifteen years was run at german austrian and slovenian universities we also modified two of our basic scenarios to check for responsibility aspects additionally we included information on socio demographic characteristics of respondents in a probit model answers depend on cultural environments but results indicate some convergence over time responsibility considerations are important if they can be attributed to particular persons although overall explanatory power of demographic attributes is low we observe significant gender differences

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

s s policies for a dynamic inventory model with stochastic lead times this study analyzes a stochastic lead time inventory model under the assumptions that a replenishment orders do not cross in time and b the lead time distribution for a given order is independent of the number and sizes of outstanding orders the study extends the existing literature on the finite horizon version of the model and yields an intuitively appealing dynamic program that is nearly identical to one that would apply in a transformed model with all lead times fixed at zero hence many results that have been derived for fixed lead time models generalize easily conditions for the optimality of myopic base stock policies and for the optimality of s s policies are established for both finite and infinite planning horizons the infinite horizon model analysis is extended by adapting the fixed lead time results for the efficient computation of optimal and approximately optimal s s policies

fairness risk preferences and independence impossibility theorems the most widely used economic models of social preferences are specified only for certain outcomes there are two obvious methods of extending them to lotteries if we do so by expected utility theory so that the independence axiom is satisfied our results imply that the resulting preferences do not exhibit ex ante fairness if we do so by replacing certain outcomes with their expected utilities for each individual so that individual risk preferences are preserved then ex ante fairness may be preserved but neither the independence axiom nor ex post fairness is satisfied both ex ante and ex post fairness can be satisfied but then the individual does not have well defined preferences over own lotteries

equality of opportunity and luck definitions and testable conditions with an application to income in france abstract we offer a model of equality of opportunity that encompasses different conceptions expressed in the public and philosophical debates in addition to circumstances whose effect on outcome should be compensated and effort which represents a legitimate source of inequality we introduce a third factor luck that captures the random factors whose impact on outcome should be even handed for equality of opportunity to be satisfied then we analyze how the various definitions of equality of opportunity can be empirically identified given data limitations and provide testable conditions definitions and conditions resort to standard stochastic dominance tools lastly we develop an empirical analysis of equality of opportunity for income acquisition in france over the period 1979 2000 which reveals that the degree of inequality of opportunity tends to decrease and that the degree of risk of income distributions conditional on social origin appears very similar across all groups of social origins