Topic:Production and Inventory Dynamics Under Ambiguity Aversion

Lecturer:Yulei Luo

Yulei Luo,a professor of Economics at the School of Economics and Management of the University of Hong Kong.He received his PhD from Princeton University(under the supervision of leading economists such as Professor Christopher A.Sims,winner of the 2011 Nobel Prize in Economics). His research interests are macroeconomics, information economics, monetary theory and policy.Professor Luo has recently published more than 20 high-level articles in the American Economic Journal: Macroeconomics,Journal of Economic Theory,Management Science,Economic Journal,Journal of International Economics,Journal of European Economic Association,Review of Economic Dynamics,Journal of Economic Dynamics and Control and other top international journals of economics and management.

Abstract:

In this paper we propose a production-cost smoothing model with Knightian uncertainty due to 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 the stock-out avoidance models.

Time:15:00-16:30p.m,June 12th,2024

Venue:B321,Zhixin Building,Central Campus