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Inventory and Price Behaviour
Patricia B. Reagan
The Review of Economic Studies
Vol. 49, No. 1 (Jan., 1982), pp. 137-142
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2297146
Page Count: 6
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The point of this paper is that inventory adjustment attenuates downward pressure on price when realized demand is low because firms accumulate inventory hold-overs, speculating that demand will be stronger in the succeeding period. When realized demand is high the firm draws down its inventories until a "stock-out" occurs and price rises to clear the market.
The Review of Economic Studies © 1982 The Review of Economic Studies, Ltd.