Inventories and the Automobile Market
This article is based upon MBA Project – Inventories and the Automobile Market. This article is concise form of the project. This is very useful for the students of management. Some of the contents are given down below and you can download the entire project as well.
This article studies the within-model-year pricing, production, and inventory management of new
automobiles. Using new monthly data on U.S. transaction prices, we document that, for the typical
vehicle, prices fall over the model year at a 9.0 percent annual rate. Concurrently, both sales and
inventories are hump shaped. To explain these time series, we formulate an industry model for new
automobiles in which inventory and pricing decisions are made simultaneously. The model predicts
that automakers’ build-to-stock inventory management policy substantially influences the time-series
of prices and sales, accounting for four-tenths of the price decline observed over the model year.