Production Smoothing in the Linear Quadratic Inventory Model
Contrary to popular belief, the linear quadratic inventory model does not imply that, in response to demand shocks, output is always less variable than sales. When demand shocks are not anticipated, and without this assumption it is hard to see why firms should hold inventories in the first place, it is shown that output can be more variable than sales, even when the only shocks are demand shocks, and the inventory target is not a rising function of sales. The variance of output will typically exceed that of sales when the firm's marginal cost curve is fairly flat. Copyright 1994 by Royal Economic Society.
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.
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.
Volume (Year): 104 (1994)
Issue (Month): 425 (July)
|Contact details of provider:|| Postal: Office of the Secretary-General, Rm E35, The Bute Building, Westburn Lane, St Andrews, KY16 9TS, UK|
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishers.co.uk/asp/journal.asp?ref=0013-0133|
When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:104:y:1994:i:425:p:864-75. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.