IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Inventories and the Volatility of Production

  • Kahn, James A

A stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales. This paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories. Even with no productivity shocks, optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation, or if the firm can backlog excess demand. The reason is that a demand shock affects both the actual inventory level (given unchanged production) and the desired level. Production must replenish the stock and adjust to the new desired level. Copyright 1987 by American Economic Association.

If 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.

File URL: http://links.jstor.org/sici?sici=0002-8282%28198709%2977%3A4%3C667%3AIATVOP%3E2.0.CO%3B2-%23&origin=repec
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 77 (1987)
Issue (Month): 4 (September)
Pages: 667-79

as
in new window

Handle: RePEc:aea:aecrev:v:77:y:1987:i:4:p:667-79
Contact details of provider: Web page: https://www.aeaweb.org/aer/
Email:


More information through EDIRC

Order Information: Web: https://www.aeaweb.org/subscribe.html

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:77:y:1987:i:4:p:667-79. See general information about how to correct material in RePEc.

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.