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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26289
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| Title: | | Adjustment costs, inventories and output  |
| Authors: | | Danziger, Leif |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2244 |
| Abstract: | | This paper analyzes the optimal adjustment strategy of an inventory-holding firm facing price- and quantity-adjustment costs in an inflationary environment. The model nests both the original menu-cost model that allows production to be costlessly adjusted, and the later model that includes price- and quantity-adjustment costs, but rules out inventory holdings. It is shown that the firms optimal adjustment strategy may involve stockouts. At low inflation rates, output is inversely related to the inflation rate, and the length of time demand is satisfied increases with the demand elasticity but decreases with the storage cost and the real interest rate. |
| Subjects: | | menu costs quantity-adjustment costs inventories stockouts output inflation |
| JEL: | | D21 D24 L23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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