The Response of Prices, Sales, and Output to Temporary Changes in Demand

We determine empirically how the Big Three automakers accommodate shocks to demand. They have the capability to change prices, alter labor inputs through temporary layoffs and overtime, or adjust inventories. These adjustments are interrelated, non-convex, and dynamic in nature. Combining weekly plant-level data on production schedules and output with monthly data on sales and transaction prices, we estimate a dynamic profit-maximization model of the firm. Using impulse response functions, we demonstrate that when an automaker is hit with a demand shock sales respond immediately, prices respond gradually, and production responds only after a delay. The size of the immediate sales response is linear in the size of the shock, but the delayed production response is non-convex in the size of the shock. For sufficiently large shocks the cumulative production response over the product cycle is an order of magnitude larger than the cumulative price response. We examine two recent demand shocks: the Ford Explorer/Firestone tire recall of 2000, and the September 11, 2001 terrorist attacks.automobile pricing, inventories, revenue management, indirect inference

Prices, Production and Inventories over the Automotive Model Year

This paper studies the within-model-year pricing and production of new automobiles. Using new monthly data on U.S. transaction prices, we document that for the typical new vehicle, prices fall over the model year at a 9.2 percent annual rate. Concurrently, both sales and inventories are hump shaped. To explain these time series, we formulate a market equilibrium model for new automobiles in which inventory and pricing decisions are made simultaneously. On the demand side, we use micro-level data to estimate time-varying aggregate demand curves for each vehicle. On the supply side, we solve a dynamic programming model of an automaker that, while able to produce only one vintage of a product at a time, may accumulate inventories and consequently sell multiple vintages of the same product simultaneously. The profit maximizing pricing and production strategies under a build-to-stock inventory policy imply declining prices and hump-shaped sales and inventories of the magnitudes observed in the data. Further, roughly half of the price decline is driven by inventory control considerations, as opposed to decreasing demand.

The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools

This paper describes the database on U.S. patents that we have developed over the past decade, with the goal of making it widely accessible for research. We present main trends in U. S. patenting over the last 30 years, including a variety of original measures constructed with citation data, such as backward and forward citation lags, indices of 'originality' and 'generality', self-citations, etc. Many of these measures exhibit interesting differences across the six main technological categories that we have developed (comprising Computers and Communications, Drugs and Medical, Electrical and Electronics, Chemical, Mechanical and Others), differences that call for further research. To stimulate such research, the entire database about 3 million patents and 16 million citations is now available on the NBER website. We discuss key issues that arise in the use of patent citations data, and suggest ways of addressing them. In particular, significant changes over time in the rate of patenting and in the number of citations made, as well as the inevitable truncation of the data, make it very hard to use the raw number of citations received by different patents directly in a meaningful way. To remedy this problem we suggest two alternative approaches: the fixed-effects approach involves scaling citations by the average citation count for a group of patents to which the patent of interest belongs; the quasi-structural approach attempts to distinguish the multiple effects on citation rates via econometric estimation.

The Response of Prices, Sales, and Output to Temporary Changes in Demand

We determine empirically how the Big Three automakers accommodate shocks to demand. They have the capability to change prices, alter labor inputs through temporary layoffs and overtime, or adjust inventories. These adjustments are interrelated, non-convex, and dynamic in nature. Combining weekly plant-level data on production schedules and output with monthly data on sales and transaction prices, we estimate a dynamic profit-maximization model of the firm. Using impulse response functions, we demonstrate that when an automaker is hit with a demand shock sales respond immediately, prices respond gradually, and production responds only after a delay. The size of the immediate sales response is linear in the size of the shock, but the delayed production response is non-convex in the size of the shock. For sufficiently large shocks the cumulative production response over the product cycle is an order of magnitude larger than the cumulative price response. We examine two recent demand shocks: the Ford Explorer/Firestone tire recall of 2000, and the September 11, 2001 terrorist attacks.

ON THE ROLE OF THE BROKERAGE INSTITUTION IN THE DEVELOPMENT OF ETHIOPIAN AGRICULTURAL MARKETS

The recognition that policies aimed at “getting prices right” in less developed countries were failing due to incomplete markets has spurred a new wave of reforms, directed instead at “getting markets and institutions right”. Although previous studies have documented the potentially crucial role of the brokerage institution in crop commercialisation, few have investigated what determines wholesalers’ decisions to use brokers. Using data collected in 2006/07 by Gabre-Madhin, IFPRI and EDRI, we examine Ethiopian traders’ decisions regarding whether or not they should use brokers, and how much. Independent variables are human, financial and social asset availability, implemented trading practices, access to infrastructure and institutions, location, travelled distance and traded crops. Results show that brokerage services are particularly valuable for wholesalers lacking social capital and storage capacity, who are based in areas with low population density, and who trade at a distance especially when roads are not asphalted. Buyers in drought-prone domains rely on brokers more for their long-distance purchases, while sellers in moisture-reliable domains employ brokers more for their long-distance sales. These results provide useful indications regarding where and how the recent formalisation of brokerage functions through the ECX could be most beneficial for the functioning of Ethiopian agricultural markets.Agribusiness, O12, O13, O18,

2008 Survey of the Performance of American Elections: Final Report

Analyzes results of a survey on the 2008 elections voting experience, voter confidence in the system, reasons for not voting, and support for reform proposals. Examines how age, race/ethnicity, and length of residency affect voters' experiences

Making cultural infrastructure: can we design the conditions for culture?

This is a report by Theatrum Mundi on a research project that asked “can we design the conditions for culture?

Market Value and Patent Citations: A First Look

As patent data become more available in machine-readable form, an increasing number of researchers have begun to use measures based on patents and their citations as indicators of technological output and information flow. This paper explores the economic meaning of these citation-based patent measures using the financial market valuation of the firms that own the patents. Using a new and comprehensive dataset containing over 4800 U. S. Manufacturing firms and their patenting activity for the past 30 years, we explore the contributions of R&D spending, patents, and citation-weighted patents to measures of Tobin's Q for the firms. We find that citation-weighted patent stocks are more highly correlated with market value than patent stocks themselves and that this fact is due mainly to the high valuation placed on firms that hold very highly cited patents.

Market Value and Patent Citations: A First Look

As patent data become more available in machine-readable form, an increasing number of researchers have begun to use measures based on patents and their citations as indicators of technological output and information flow. This paper explores the economic meaning of these citation-based patent measures using the financial market valuation of the firms that own the patents. Using a new and comprehensive dataset containing over 4800 U. S. Manufacturing firms and their patenting activity for the past 30 years, we explore the contributions of R&D spending, patents, and citation-weighted patents to measures of Tobin's Q for the firms. We find that citation-weighted patent stocks are more highly correlated with market value than patent stocks themselves and that this fact is due mainly to the high valuation placed on firms that hold very highly cited patents. We also find that self-citations are worth about twice as much as ordinary citations, especially to smaller firms.

Time for TIF? The prospects for the introduction of Tax Increment Financing in the UK from a local authority perspective

In September 2010, following an endorsement by Deputy Prime Minister Nick Clegg at the Liberal Democrat Party Conference, HM Treasury released a press statement confirming that TIF would be introduced in the UK.1 It stated that Treasury and local authorities would work together in order to design a framework of rules within which TIF would operate. This research investigates what this framework of rules may comprise and how it may operate in the UK. There is surprising neglect, in literature on TIF, of what local authorities think about it and its potential to facilitate regeneration projects. A survey of 200 local authorities in the UK was conducted, complemented by interviews with local authority officers in Scotland, where pilot TIF projects are already under way. The research focuses in particular on the approval process necessary to ensure viable TIF schemes are identified and progressed, how these schemes are managed and financed, and what the main risks are for local authorities. Of primary concern to LA officers is the financial viability of a project, followed by its long-term commercial viability, overall cost, value for money and impact on surrounding areas. The main risks are identified as being that: the uplift in business rates is insufficient to cover the cost of the loan; TIF does not work in areas of greatest need; private sector investment fails to materialise; and displacement is generated. The paper concludes that such risks may be mitigated by adopting a rigorous appraisal process and robust management structure, and predicts that a two-tier TIF approval process, with similarities to that employed by the Scottish TIF pilots, may emerge