Economics Insights @ CBS

In this paper we address periodic base-stock policies for stochastic economic lot scheduling problems. These represent manufacturing settings in which multiple items compete for the availability of a common capacity source, in the presence of setup times and/or costs, incurred when switching between items, and in the presence of uncertainty regarding demand patterns, production, and setup times. Under periodic base-stock policies, items are produced according to a given periodic item-sequence.

Arya, Glover, and Sunder (AGS) contribute to the earnings management literature along two dimenstion. First, they classify existing explanations for earnings manipulation, based on the assumption of the revelation principle that is violated. Second, they introduce a model where allowing a manager to manipulate earnings serves as a commitment device. They show that both the owners and the manager can benefit from earnings management (a Pareto improvement). My discussion first deals with the general phenomenon of earnings management and then with the specifics of the AGS model.

The effects of tax reform on corporate financial decisions help determine whether reform will increase capital formation and simplify the tax system. This paper describes the effects of fundamental tax reform on corporate tax planning and summarizes economists' knowledge of the magnitude of these effects. We analyze both income tax reform, consisting of integrating the corporate and personal income taxes, and moving to a broad-based consumption tax. As prototypes of reform, we use the U.S.

This paper studies the trade-off between inventory levels and the delivery leadtime offered to customers in achieving a target level of service. It addresses the question of how much a delivery leadtime can be reduced, per unit increase of inventory, at a fixed fill rate. We show that for a class of assemble-to-order models with stochastic demands and production intervals there is a simple linear trade-off between inventory and delivery leadtime, in a limiting sense, at high fill rates.