Adjustment Costs, Inventories and Output

Leif Danziger ()

No 2244, CESifo Working Paper Series from CESifo

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 firm’s 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.

Keywords: menu costs; quantity-adjustment costs; inventories; stockouts; output; inflation (search for similar items in EconPapers)
JEL-codes: D21 D24 L23 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp2244.pdf (application/pdf)

Related works:
Journal Article: Adjustment Costs, Inventories and Output (2008)
Working Paper: Adjustment Costs, Inventories and Output (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2244

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().