Investment, Interest Rates, and the Effects of Stabilization Policies

macroeconomics, interest rates, investment, stabilization policies

Inflation: Its Mechanics and Welfare Costs

macroeconomics, inflation

Log-concavity of compound distributions with applications in operational and actuarial models

We establish that a random sum of independent and identically distributed (i.i.d.) random quantities has a log-concave cumulative distribution function (cdf) if (i) the random number of terms in the sum has a log-concave probability mass function (pmf) and (ii) the distribution of the i.i.d. terms has a non-increasing density function (when continuous) or a non-increasing pmf (when discrete). We illustrate the usefulness of this result using a standard actuarial risk model and a replacement model.We apply this fundamental result to establish that a compound renewal process observed during a random time interval has a log-concave cdf if the observation time interval and the inter-renewal time distribution have log-concave densities, while the compounding distribution has a decreasing density or pmf. We use this second result to establish the optimality of a so-called (s, S) policy for various inventory models with a stock-out cost coefficient of dimension [$/unit], significantly generalizing the conditions for the demand and leadtime processes, in conjunction with the cost structure in these models. We also identify the implications of our results for various algorithmic approaches to compute optimal policy parameters. Copyrigh

Econometric Methods for Endogenously Sampled Time Series: The Case of Commodity Price Speculation in the Steel Market

This paper studies the econometric problems associated with estimation of a stochastic process that is endogenously sampled. Our interest is to infer the law of motion of a discrete-time stochastic process {pt} that is observed only at a subset of times {t1,..., tn} that depend on the outcome of a probabilistic sampling rule that depends on the history of the process as well as other observed covariates xt . We focus on a particular example where pt denotes the daily wholesale price of a standardized steel product. However there are no formal exchanges or centralized markets where steel is traded and pt can be observed. Instead nearly all steel transaction prices are a result of private bilateral negotiations between buyers and sellers, typically intermediated by middlemen known as steel service centers. Even though there is no central record of daily transactions prices in the steel market, we do observe transaction prices for a particular firm -- a steel service center that purchases large quantities of steel in the wholesale market for subsequent resale in the retail market. The endogenous sampling problem arises from the fact that the firm only records pt on the days that it purchases steel. We present a parametric analysis of this problem under the assumption that the timing of steel purchases is part of an optimal trading strategy that maximizes the firm's expected discounted trading profits. We derive a parametric partial information maximum likelihood (PIML) estimator that solves the endogenous sampling problem and efficiently estimates the unknown parameters of a Markov transition probability that determines the law of motion for the underlying {pt} process. The PIML estimator also yields estimates of the structural parameters that determine the optimal trading rule. We also introduce an alternative consistent, less efficient, but computationally simpler simulated minimum distance (SMD) estimator that avoids high dimensional numerical integrations required by the PIML estimator. Using the SMD estimator, we provide estimates of a truncated lognormal AR(1) model of the wholesale price processes for particular types of steel plate. We use this to infer the share of the middleman's discounted profits that are due to markups paid by its retail customers, and the share due to price speculation. The latter measures the firm's success in forecasting steel prices and in timing its purchases in order to buy low and sell high'. The more successful the firm is in speculation (i.e. in strategically timing its purchases), the more serious are the potential biases that would result from failing to account for the endogeneity of the sampling process.

AN EMPIRICAL ANALYSIS OF AUTOMOTIVE MANUFACTURERS SUPPLY CHAIN PERFORMANCE IN CHINA

The research develops a framework for the evaluation of automotive supply chain performance in China. In addition, the research presents indications from a study of Chinese automotive companies with regards to their evaluation and attempts to propose some alternatives for future improvement

Retail Inventory Behavior and Business Fluctuations

macroeconomics, retail inventory, business fluctuations

A study of the effects of changing raw material prices and varying interest rates on the stockholding decisions of a small manufacturing company

A study is made of the inventory control procedures in a manufacturing company with an annual turnover of around £5M. The study is made at a time of fluctuating prices and varying interest rates in order to determine both their effect on, and ways of improving, the control procedures. The study concentrates on one of the many stock items carried, peppermint oil, it being fairly typical. The study lists the main costs of establishing and growing peppermint in Washington State. The study reveals the importance of price forecasting in the determination of timing and quantity of purchases. Various price forecasting methods including that due to Box and Jenkins are tested and found wanting for one reason or another. The ordinary economic order quantity formula is modified to take account of fluctuating prices and varying interest rates. It is then tested with an assumption of perfect price forecasts against the performance of the firm’s buyer over the years 1971-1978. The results indicate that the buyer possesses faculties which cannot yet, if ever, be emulated by machine based formulas. Normally economic models are devised with the assumption that the purchaser is at least risk-neutral if not risk-averse. This study reveals a pronounced bias in the opposite direction, namely risk-preference, in the case of essential oil traders. The study, in examining the market structure, also shows that there are peppermint farmers in the western United States who are both willing and able to make direct contracts with importers in the United Kingdom in order to eliminate the risks associated with dealing through second and third parties. The absence of a formal controlled market for the particular oil studied is noted together with the buyer’s inability uO ’hedge’ except with purchases of other equally risky oils. It is recommended that the possibility of such a market being organised be further investigated

Management cybernetics: Computer simulation models of operational management organizations

This thesis was submitted for the degree of Doctor of Philosophy and awarded by Brunel University.Cybernetics is the science of effective organization, i.e. the science that describes the general principles of growth, learning and adaptation in complex, dynamical systems. Stafford Beer regards his viable system model as a design for effective formal organization. He also declares that since his model is explicitly based upon the principles of cybernetics, it facilitates consideration of what is and is not possible within formal organizations and provides guidance in creating efficient structures. The purpose of this research is to demonstrate and test Stafford Beer's ideas on the viable system model via the simulation of certain business activities. A methodology for getting access to the cybernetic body of knowledge is given as well as examples of cybernetic laws relevant to managerial and business practice. An important part of the work is devoted to the explanation and discussion of Stafford Beer's viable system model, and the importance it represents as a cybernetic method for the design of organizational structures. Simulation models incorporating the major activities of a business firm are represented and used as case studies to investigate how basic industrial organizations based on Beer's viable system model work under operational conditions