Production and inventory dynamics under ambiguity aversion

• 成果类型: Article
• 署名作者: Luo, Yulei; Nie, Jun; Wang, Xiaowen; Young, Eric R.
• 署名单位: University of Hong Kong; Wuhan University; Liaoning University; University of Virginia
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2025.103767
• 发表日期: 2025
• 关键词: Ambiguity aversion; Knightian uncertainty; inventories; Production-cost smoothing

摘要

In this paper we propose a production-cost smoothing model with Knightian uncertainty and ambiguity aversion to study the joint behavior of production, inventories, and sales. Our model can explain ten facts that previous studies find difficult to account for simultaneously including the high volatility of production relative to sales, the low ratio of inventory-investment volatility to sales volatility, the positive correlation between sales and inventory investment, and the negative correlation between the inventory-to-sales ratio and sales. Our main results extend to a model of endogenous sales. Finally, we find that the stock-out avoidance motive emerges endogenously in our model, reconciling the long debate in the inventory literature over the production-cost smoothing and stock-out avoidance models.