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Information acquisition, urgent production, and welfare

This paper studies the efficiency of information acquisition when firms hold inventories and face costly urgent production. Firms operate under demand uncertainty and hold inventories because producing in advance is generally cheaper than producing urgently after demand is realized. They acquire consumer data in various forms to reduce this uncertainty and improve allocations. The paper shows that firms under-acquire information compared to the welfare-maximizing level, because they do not internalize the full benefits of information acquisition, which include improved allocations for consumers. This under-acquisition of information results in suboptimal inventory decisions, excessive urgent production, and welfare losses..

Marginal Propensity to Consume of Consumption and Savings Targeters

This paper provides an explanation for conflicting evidence on the relation between marginal propensity to consume and liquid assets. I study marginal propensity to consume out of liquid assets in an environment where agents infrequently update their financial plans and choose between consumption and savings as a decision variable in the utility maximization problem.

I show that average MPC consists of the average slope of policy functions in the economy and an additional component resulting from agents switching between decision variables. I assess the component in a dynamic consumption-savings model with income fluctuations and demonstrate that this component can explain conflicting evidence on the negative relation between MPC and liquid assets.