Inventories in a Competitive Environment
Journal of Political Economy
1993
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 reduces output by less than one unit. An increase in inventories leads to an increase in the price spread. Output tends to vary more than sales.
- DOI
- 10.1086/261907
- Volume
- 101 (5)
- Pages
- 863-886
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref