Econometrics of inventory holding and shortage costs: the case of refined gasoline

Thesis/Dissertation · Tue Jan 01 00:00:00 EST 1985

OSTI ID:5301539

Krane, S D

This thesis estimates a model of a firm's optimal inventory and production behavior in order to investigate the link between the role of inventories in the business cycle and the microeconomic incentives for holding stocks of finished goods. The goal is to estimate a set of structural cost function parameters that can be used to infer the optimal cyclical response of inventories and production to shocks in demand. To avoid problems associated with the use of value based aggregate inventory data, an industry level physical unit data set for refined motor gasoline is examined. The Euler equations for a refiner's multiperiod decision problem are estimated using restrictions imposed by the rational expectations hypothesis. The model also embodies the fact that, in most periods, the level of shortages will be zero, and even when positive, the shortages are not directly observable in the data set. These two concerns lead us to use a generalized method of moments estimation technique on a functional form that resembles the formulation of a Tobit problem. The estimation results are disappointing; the model and data yield coefficient estimates incongruous with the cost function interpretations of the structural parameters. These is only some superficial evidence that production smoothing is significant and that marginal inventory shortage costs increase at a faster rate than do marginal holding costs.

• Research Organization: California Univ., Berkeley (USA)
• OSTI ID: 5301539
• Resource Relation: Other Information: Thesis (Ph. D.)
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
29 ENERGY PLANNING
POLICY AND ECONOMY
GASOLINE
INVENTORIES
PRODUCTION
COST ESTIMATION
DATA ANALYSIS
ECONOMETRICS
MATHEMATICAL MODELS
SHORTAGES
ECONOMICS
FUELS
LIQUID FUELS
PETROLEUM PRODUCTS
020500* - Petroleum- Products & By-Products
294002 - Energy Planning & Policy- Petroleum
290200 - Energy Planning & Policy- Economics & Sociology