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On the Timing of Production Decisions in Monetary Economies

Author

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  • Anbarci, Nejat
  • Dutu, Richard
  • Sun, Ching-jen

Abstract

In most macroeconomic models inflation tends to be harmful. In this paper we show that by simply changing the timing of production decisions by firms from “on demand” to “in advance”, some inflation can boost welfare as long as goods are sufficiently perishable. The main conclusion from this research is that by effectively hiding the strategic interaction between supply and demand, assuming production on demand is not without loss of generality.

Suggested Citation

  • Anbarci, Nejat & Dutu, Richard & Sun, Ching-jen, 2016. "On the Timing of Production Decisions in Monetary Economies," MPRA Paper 72876, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:72876
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    References listed on IDEAS

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    1. Baughman, Garth & Rabinovich, Stanislav, 2021. "Capacity choice, monetary trade, and the cost of inflation," European Economic Review, Elsevier, vol. 134(C).
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    More about this item

    Keywords

    Timing; Perishability; Production; Money; Inflation; Search.;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D2 - Microeconomics - - Production and Organizations
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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