0 a situation in which there are no goods of a particular kind available for sale: --
1 a situation in which particular goods are no longer available for sale: --
This means that shoppers will have a 42% chance of fulfilling a ten-item shopping list without encountering a stockout.
It is also a strategy aimed at reducing stockout costs.
Even with idiosyncratic risk added to strengthen it, the stockout avoidance motive is insufficient to generate stocks near the data without destroying model performance along other important margins.
Although stockout avoidance has been prominent in rationalizing stocks within the recent inventory literature, the model itself has not previously seen a quantitative dynamic stochastic general equilibrium inspection.
As already noted, it is difficult to generate inventory-sales ratios close to the data in the basic stockout avoidance model, where aggregate risk motivates inventory holdings.
As we noted above, even when generalized to allow for idiosyncratic risk (and absent capital accumulation), the stockout avoidance model continues to have difficulty in generating empirically viable inventory holdings.
Thus, the stockout avoidance model either cannot reproduce the measured level of inventories present in the actual economy or fails with regard to other important inventory facts.
Table 3 summarizes the baseline parameters for the generalized stockout avoidance model with two sets of intermediate goods firms.
