Market Perceptions and Inventory-Price-Employment Plans

Ordered-probit analyses of NFIB survey data show that individual firms generally conform to the stock adjustment model of inventory investment, with the predicted response more likely when inventories are perceived as excessive than when deficient. Contrary to inferences about slow adjustment speeds...

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Bibliographic Details
Published in:The review of economics and statistics 1989-05, Vol.71 (2), p.318-324
Main Authors: Carlson, John A., Dunkelberg, William C.
Format: Article
Language:English
Subjects:
Business structures
Demand change
Economic costs
Economic statistics
Economic surveys
Employment
Employment policies
Inventories
Inventory control
Investment inventories
Investments
Labor costs
Price changes
Prices
Pricing
Statistical analysis
Variable costs
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Summary:Ordered-probit analyses of NFIB survey data show that individual firms generally conform to the stock adjustment model of inventory investment, with the predicted response more likely when inventories are perceived as excessive than when deficient. Contrary to inferences about slow adjustment speeds from aggregate data, inventory adjustments by individual firms do not tend to take more than three months to complete. There is no evidence that price is used to achieve desired inventory targets, but prices are sticky in that changes set in motion one quarter tend to continue into the next quarter.
ISSN:0034-6535
1530-9142
DOI:10.2307/1926978