We present a Gordon-growth-model-based formula for wealth-income ratios. Relative to the conventional formula popularized by Piketty and Zucman, the Gordon formula shows how the price and volume of wealth interact with each other. We highlight and confirm two implications of the Gordon formula...

We propose a simple theory of trade credit and prepayment. A downstream firm trades off inventory holding costs against lost sales. Lost final sales impose a negative externality on the upstream firm. We show that allowing the downstream firm to pay with a delay, an arrangement known as “trade...

Firms producing seasonal goods often make order and production choices prior to highly uncertain sales, thus lending an investment quality to their decisions. Using specialized inputs imposes a delay in receiving them and linked with a long production period the firm makes its order, production...

We propose a simple theory to account for the prevalence of interfirm credit at an interest rate of zero. A downstream firm trades off inventory holding costs against lost sales. Lost final sales impose a negative externality on the upstream firm. The solution requires a subsidy limited by the...