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On The Timing Of Production Decisions In Monetary Economies

Author

Listed:
  • Nejat Anbarci
  • Richard Dutu
  • Ching‐Jen Sun

Abstract

In most macroeconomic models inflation tends to be harmful. In this article, 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

  • Nejat Anbarci & Richard Dutu & Ching‐Jen Sun, 2019. "On The Timing Of Production Decisions In Monetary Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(1), pages 447-472, February.
    • Handle: RePEc:wly:iecrev:v:60:y:2019:i:1:p:447-472
    DOI: 10.1111/iere.12359
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    Cited by:

    1. Baughman, Garth & Rabinovich, Stanislav, 2021. "Capacity choice, monetary trade, and the cost of inflation," European Economic Review, Elsevier, vol. 134(C).
    2. Lebeau, Lucie, 2020. "Credit frictions and participation in over-the-counter markets," Journal of Economic Theory, Elsevier, vol. 189(C).

    More about this item

    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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