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Inventories in a Competitive Environment

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  • Bental, B.
  • Eden, B.

Abstract

Trade is sequential: buyers arrive in batches and each batch completes trade before the next arrives. Producers allocate the available supply among all potential batches of buyers. Inventories accumulate whenever a batch does not arrive. Shocks to cost and demand are serially independent. There is a stationary relationship between inventories and prices with the following properties. Larger beginning-of-period inventories tend to depress prices. Inventories are positively serially correlated. A unit increase in inventories leads to an increase in the price spread. Output tends to vary more than sales. Copyright 1993 by University of Chicago Press.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bental, B. & Eden, B., 1992. "Inventories in a Competitive Environment," Working Papers 92-19, University of Iowa, Department of Economics.
    • Handle: RePEc:uia:iowaec:92-19
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    Cited by:

    1. Jonas D. M. Fisher & Andreas Hornstein, 2000. "(S, s) Inventory Policies in General Equilibrium," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 117-145.
    2. Frederick H. Abernathy & John T. Dunlop & Janice H. Hammond & David Weil, 1995. "The Information-Integrated Channel: A Study of the U.S. Apparel Industry in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995 Micr), pages 175-246.
    3. Benjamin Eden, 2001. "Inventories and the Business Cycle: Testing a Sequential Trading Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 562-574, July.
    4. Benjamin Eden & Maya Eden & Jonah Yuen, 2019. "Temporary sales in response to aggregate shocks," Vanderbilt University Department of Economics Working Papers 19-00003, Vanderbilt University Department of Economics.
    5. Benjamin Eden & Maya Eden & Jonah Yuen, 2016. "Inside The Price Dispersion Box: Evidence From Us Scanner Data," Vanderbilt University Department of Economics Working Papers 16-00017, Vanderbilt University Department of Economics.
    6. Marcel Fafchamps Jan Willem Gunning & Remco Oostendorp, "undated". "Inventories, Liquidity, and Contractual Risk in African Manufacturing," Working Papers 97020, Stanford University, Department of Economics.
    7. Bental, Benjamin & Demougin, Dominique, "undated". "Should We Have or Should We Have Not, and Who Should Have Paid?," Working Papers WP2011/3, University of Haifa, Department of Economics.
    8. Benjamin Eden, 2018. "Price Dispersion And Demand Uncertainty: Evidence From U.S. Scanner Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1035-1075, August.
    9. Andrew Caplin & John Leahy, 2011. "Trading Frictions and House Price Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s2), pages 283-303, October.
    10. Terry J. Fitzgerald, 1997. "Inventories and the business cycle: an overview," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 11-22.
    11. Benjamin Eden, 2014. "Demand uncertainty and efficiency," Vanderbilt University Department of Economics Working Papers 14-00011, Vanderbilt University Department of Economics.
    12. Diego Escobari & Li Gan, 2007. "Price Dispersion under Costly Capacity and Demand Uncertainty," NBER Working Papers 13075, National Bureau of Economic Research, Inc.
    13. Benjamin Eden, 1994. "Time Rigidities In The Adjustment Of Prices To Monetary Shocks: An Analysis Of Micro Data," Bank of Israel Working Papers 1994.16, Bank of Israel.
    14. Benjamin Eden, 2013. "Price dispersion and efficiency," Vanderbilt University Department of Economics Working Papers 13-00012, Vanderbilt University Department of Economics.
    15. Angara V. Raja & Hans‐Bernd Schaefer, 2007. "Are Inventories a Buffer Against Weak Legal Systems?," Kyklos, Wiley Blackwell, vol. 60(3), pages 415-439, August.
    16. Fafchamps, Marcel & Gunning, Jan Willem & Oostendorp, Remco, 2000. "Inventories and Risk in African Manufacturing," Economic Journal, Royal Economic Society, vol. 110(466), pages 861-93, October.

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    Keywords

    competition ; production;

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