Economic Theory and the World of Practice: A Celebration of the ( S, s ) Model
AbstractIt was the question of how best to balance the costs of ordering and of running out of stock against the costs of holding excess inventory that inspired Kenneth Arrow, Theodore Harris, and Jacob Marschak to introduce the ( S, s ) model in 1951. In this celebratory article, we show how this model not only answered important practical questions, but also opened the door to a quite startling range of important and challenging follow-up questions, many of great practical importance and analytic depth. The ( S, s ) model has become one of the touchstone models of economics, opening new vistas of applied economic theory to all who internalize its structure. Today it is universally applied to solve questions faced in inventory control. The core model elements, uncertainty and fixed costs of adjustment, are ubiquitous, which has resulted in its becoming the general purpose economic model of discrete adjustment. The ( S, s ) model has also become a profound source of inspiration for macroeconomists seeking to understand the role that discrete microeconomic adjustments play in macroeconomic fluctuations. Looking forward, we foresee rapid growth in the use of ( S, s ) modeling to aid households making complex and costly financial decisions, such as when and how to terminate a mortgage. In the projected era of "household operations research," new modeling challenges will arise due to enriched feedback from the world of practice.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 24 (2010)
Issue (Month): 1 (Winter)
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Personal Finance
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- M11 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Production Management
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Jenny Carolina Saldaña Cortés, 2011. "Programación semidefinida aplicada a problemas de cantidad económica de pedido," DOCUMENTOS CEDE 008735, UNIVERSIDAD DE LOS ANDES-CEDE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.