Citation

Discussion Paper Details

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Full Details

Title: Production Decisions under Demand Uncertainty: The High-Low Search Approach

Author(s): Dennis J. Snower

Publication Date: March 1988

Keyword(s): Demand Uncertainty, Inventories, Production Decisions and Search

Programme Area(s): Applied Macroeconomics

Abstract: The paper presents a model of 'high-low search' under uncertainty, in which a 'conservative' firm 'searches' for an unknown product demand by making a sequence of production decisions. After each production decision and the concomitant sales, the firm infers whether its supply is 'too high' or 'too low'. We show how the production decision reduces the firm's demand uncertainty interval and how this reduced uncertainty (in turn) affects its future production decisions.

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Bibliographic Reference

Snower, D. 1988. 'Production Decisions under Demand Uncertainty: The High-Low Search Approach'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=223