Adjustment Costs,Inventories and Output

This paper analyzes the optimal adjustment strategy of an inventory‐holding firm facing price‐ and quantity‐adjustment costs in an inflationary environment. The model nests both the original menu‐cost model that allows production to be costlessly adjusted, and the later model that includes price‐ and quantity‐adjustment costs, but rules out inventory holdings. It is shown that the firm's optimal adjustment strategy may involve stockouts. At low inflation rates, output is inversely related to the inflation rate, and the length of time demand is satisfied increases with the demand elasticity but decreases with the storage cost and the real interest rate.     

Symmetric and asymmetric committees

This paper studies the assignment of decision makers to two committees that make decisions by a simple majority rule. There is an even number of decision makers at each of the various skill levels and each committee has an odd number of members. Surprisingly, even with the symmetric assumptions in the spirit of Condorcet, a symmetric composition of committees is not always optimal. In other words, decision makers with different skill levels should not generally be evenly divided among the committees. However, in the special case of only two skill levels, it is optimal to compose the committees evenly.     

A graphic representation of the Nash and Lindahl equilibria in an economy with a public good

In an economy with a public good the noncooperative Nash equilibrium and the cooperative Lindahl equilibrium are represented graphically. The Nash equilibrium is shown to be non-optimal, while the Lindahl equilibrium is shown to be optimal. Simple stability analyses are undertaken. Finally, the two equilibria are compared. It appears that more public good will be allocated in the Lindahl than in the Nash equilibrium, and that in a sufficiently large economy a transition from a Nash to a Lindahl equilibrium will be advantageous for everyone.     

Don't call us,we'll call you: Considering cognitive and physical effort in designing effective response systems to manage extended in-process wait

People must often wait for days or weeks to receive test results, price quotes, products, etc. Service providers may manage user experience during such in-process waits using notification systems that inform users when a response is available or inquiry systems that require users to inquire about response availability, thereby imposing prospective memory requirements on users. Based on the prospective memory and wait time literature, we make predictions regarding how response system (notification vs. inquiry) moderates the effects of waits that are shorter or longer than the provider promised on user evaluation of the wait. We find that users of a notification system evaluate a wait more positively and are less sensitive to deviations of actual from promised wait time than are users of an inquiry system. This advantage was more pronounced for a wait that was longer (vs. shorter) than promised. These effects of system and expectation on evaluation were fully mediated by their impact on the cognitive and physical effort of navigating the system. Finally, a week after having experienced a wait, users of an inquiry system who had waited longer (vs. shorter) than promised cooperated less on a follow-up task, highlighting another downside of using an inquiry system.     

On optimal wage indexation when shocks are real

This note studies the optimal degree of wage indexation in the presence of real shocks. Contrary to what is indicated in the literature, it is demonstrated that the optimal degree of indexation is not limited to (0;1) but may take any value in (-∞;∞).     

Employment location and wage rates of poverty-area residents

This paper tests a crucial assumption in the debate between those who advocate ghetto development and those who advocate ghetto dispersal: that the suburban jobs held by urban poverty-area residents are economically superior to the jobs held by those who both live and work in the poverty area. The motivations of poverty-area residents for commuting to a suburban job are analyzed and tested using microeconomic data from the 1970 Census Employment Survey. The analysis finds no empirical support for the hypothesis and implied policies that suburban jobs provide superior pecuniary advantages for poverty-area residents.     

On employment,wage and risk sharing in labor contracts

This note studies risk sharing in labor contracts when the price of the firm's product is uncertain. It demonstrates that if the firm adjusts employment at its own discretion, then the wage should not in general be constant, but should be constant only if the production function is of the Cobb-Douglas type.