Marginal Value Of Time Research Articles

How Marginal Value of Time Influences Optimality when Remanufacturing to Multiple Generations

Because a product’s value decays over time, recovered items (cores) cannot regain their original value when remanufactured—even if kept in pristine condition. We consider a Remanufacturing Original Equipment Manufacturer who can remanufacture recovered cores to their original configuration or upgrade them to current technology. He sells new and remanufactured items concurrently. Each production period signifies an upgrade of the product’s features to a new technological generation. We use our novel modeling of Marginal Value of Time (MVT) to perform a rigorous structural decomposition over all potentially optimal values of costs, consumers’ valuations, core availability, and MVT to determine conditions under which cores should be restored to their original configuration and those conditions under which cores should be upgraded to current technology. We also show that for only a very small region of the parameter space (1.58% of remanufacturing instances) does concurrently offering both generations of remanufactured units provide greater profit than does remanufacturing to the optimal single generation. Furthermore, the average improvement in these instances is negligible (0.42%).

Financial Shocks and the Cyclical Behavior of Skilled and Unskilled Unemployment

We study the effect of financial shocks in labor market dynamics. We build a model with two types of labor, two types of capital and both search and financial frictions. We find that financial shocks, modeled as exogenous disturbances to the borrowing constraint of firms, can generate realistic movements in aggregate employment and reproduce the volatile and countercyclical ratio of skilled to unskilled employment observed in the data. Tighter financial conditions impact employment through three channels: i) a fall in the marginal product of labor as a result of a reduction in aggregate capital, ii) an increase in the shadow cost of labor in terms of external financing and iii) an endogenous wage rigidity caused by a short-lived increase in households' consumption and in their marginal value of time. This endogenous wage rigidity together with the model’s calibration implying a higher re-hiring probability and lower recruitment costs for unskilled workers, explains the volatility of relative employment.

Valuing time in supply chains: Establishing limits of time-based competition

Over the past two decades the growth in international trade and the offshore migration of US manufacturing have created global supply chains with longer lead-times and slower response. This suggests that traditional supply chains have encountered limits to time-based competition in which the cost of faster replenishment exceeds the benefits. This paper explores and quantifies those limits to time-based competition in make-to-stock supply chains for functional products (products with stable demand over relatively long life cycles).The marginal value of time is used to define the limits of time-based competition in a supply chain, and we define it as the change in total inventory costs per unit change in supply chain lead-time. To calculate the value of time, we develop a set of simple analytical expressions that apply to most standard reorder-point inventory policies under deterministic and variable lead-times. By not requiring optimal inventory policies and expressing the value of time in terms of the unit cost of the product, we obtain very general results that are essentially product-free. We validate the analytical expressions using data from actual supply chains to simulate the inventory cost effects of changes in the lead-time. The results show that the marginal value of time in a supply chain is surprisingly low; it generally falls within a range of 0.4–0.8% of product unit cost per week.Our analytical models explain why there has been expansive growth in global supply chains for functional products. The key tradeoff in outsourcing is between reduced variable production cost and the increased inventory cost of longer supply chain lead-times. The models show analytically that the incremental inventory cost is extremely small relative to the cost benefit. The growth in global supply chains with long lead-times is cost, rather than time, driven.

Design Strategy for the Reverse Supply Chain Based on Time Value of Product

Design strategies for reverse supply chains are relatively unexplored and underdeveloped. The losses due to time delays represent a significant opportunity for asset recovery. Reverse supply chain design decisions should reflect the differences in the marginal value of time among products. The anthors propose that reverse supply chain can be designed for cost efficiency or quick response, and the decision pivots on the product’s time value. The paper analyzes the time value of return product in reverse supply chain, and the products are classified into low and high MVT based time value. In the paper both the efficient, centralized reverse supply chain matching the low MVT product and the responsive, decentralized reverse supply chain matching the high MVT product are designed In addition, the paper presents some key technologies for designing the reverse supply chain.

How much is a reduction in morning stiffness worth to patients with rheumatoid arthritis?

Objective: The aim of this study was to determine the monetary equivalent of the emotional and functional impact of morning stiffness (MS) in patients with rheumatoid arthritis (RA), using alternative valuing methods.Methods: Telephone interviews were conducted among 166 patients with RA to assess utility and clinical symptoms, including MS. Three standard economic methods were used: the human capital approach (HCA), marginal value of time (MVT), and willingness-to-pay (WTP).Results: The monetary equivalent of the impact of MS varied with the method used (from EUR 5.74 to EUR 17.87 per patient per day) and severity of MS (5–8-fold higher in patients with severe MS compared with mild MS). Patients placed considerable value on a reduction in duration and severity of MS. Patients with MS lasting an hour or more were willing to pay EUR 21.74/day to stop the symptom and EUR 10.63/day to halve the duration. Patients with severe MS were willing to pay EUR 47.86/day to stop the symptom and EUR 21.68/day to halve the severity.Conclusions: The observed variation in the monetary equivalent of the impact of MS obtained with the three estimation methods indicates that the findings of studies using different valuing methods should not be compared directly. The study demonstrates that a reduction in MS is worth a considerable amount to patients with RA, particularly those with severe or prolonged MS. These findings suggest that clinical treatment decisions to improve patients' quality of life should also incorporate therapy that reduces MS.

Effects of season, water and predation risk on patch use by birds on the African savannah

Birds from semi-arid regions may suffer dehydration during hot, dry seasons with low food availability. During this period, both energetic costs and water requirements for thermoregulation increase, limiting the scope of activity. For granivorous birds feeding on dry seeds, this is a major challenge and availability of water may affect the value of food. Water availability could (1) increase the value of a food patch when the surrounding environment is poor, due to an increase in the marginal value of energy, and (2) increase the value of the entire environment to the forager when environmental quality increases, due to an increase in the marginal value of time. We aimed to test this by measuring giving-up densities (GUDs, remaining food densities after foraging) of granivorous birds in the presence or absence of filled water pots, at different seasons differing in background food and water availability. We predicted that GUDs will increase with water provision during the dry season with moderate food, but in the early wet season with low food and water availability, GUDs will decrease with water provision. Later in the wet season, our experimental addition of water should have no effect. During seasons with low water availability but differing in food availability, results confirmed our predictions. However, when water became more abundant as the wet season progressed, birds still foraged more intensely during days with added water. In all seasons, birds fed more intensely in cover than in exposed areas, suggesting that predation risk rather than heat influenced microhabitat selection.

Reconciling Cyclical Movements in the Marginal Value of Time and the Marginal Product of Labor

Recessions appear to be times when the marginal rate of substitution between goods and workers’ time falls below the marginal product of labor. If so, the allocation of workers’ time is inefficient. I develop a model of households and production that reconciles cyclical movements in the marginal value of time and the marginal product. The model embodies the findings of research that the Frisch elasticity of labor supply is less than one. It treats unemployment in a search‐and‐matching setup. Recessions do not result in private inefficiency in the allocation of labor, but the unemployment rate may be socially inefficiently high.

Supply Chain Strategies for Perishable Products: The Case of Fresh Produce

This paper examines supply chain design strategies for a specific type of perishable product—fresh produce—using melons and sweet corn as examples. Melons and other types of produce reach their peak value at the time of harvest; product value deteriorates exponentially post‐harvest until the product is cooled to dampen the deterioration. Using the product's marginal value of time (MVT), the rate at which the product loses value over time in the supply chain, we show that the appropriate model to minimize lost value in the supply chain is a hybrid of a responsive model from post‐harvest to cooling, followed by an efficient model in the remainder of the chain. We also show that these two segments of the supply chain are only loosely linked, implying that little coordination is required across the chain to achieve value maximization. The models we develop also provide insights into the use of a product's MVT to develop supply chain strategies for other perishable products.

Time Valuation as an Alternative to Lost Enjoyment of Life in Determining Wrongful Death Damages

In a wrongful death case1 the task of the jury, if liability is found, is to award those pecuniary and non-pecuniary damages to the decedent’s survivor(s) that would make them whole. Steven Shavell (2004) defines pecuniary and non-pecuniary losses as follows: Pecuniary losses are those that either are monetary or are losses of goods that can be purchased in markets, in which case the measure of the losses comprises the replacement costs. Non-pecuniary losses correspond to the losses in utility suffered when irreplaceable things have been destroyed, such as family portraits or other unique objects. Making the survivors of a decedent whole, of course, is impossible and, in practice, testimony by a forensic economist on wrongful death damages is usually limited to calculations of lost earnings support and household work services the decedent could have provided survivors. There are other compensable pecuniary damages suffered by survivors of a decedent such as the advice, counsel, instruction, supervision, and care a decedent may have provided survivors for which a replacement cost might be calculated. Finally there are the usual non-pecuniary losses of pure companionship, consortia, love, affection, the loss of the enjoyment of the decedent’s life and bereavement suffered by survivors which are usually categorized as intangibles and left to a jury to decide or are prescribed by statute. The fundamental difference between pecuniary and non-pecuniary damages is that pecuniary damages are associated with a productive use of time (such as work, offering advice and counsel, or giving care, support, or assistance) while non-pecuniary damages derive from the pure utility of relationships alone. Schwartz and Thornton (1989) suggest that economists should approach damages from a utility base which would incorporate both the tangible (pecuniary) and intangible (non-pecuniary) losses suffered by survivors of a decedent. Such a holistic approach to damages is beyond the capacity of traditional means of calculating wrongful death damages by economists. A number of states, over the past two decades, have attempted to

End-of-life returns of long-lived products from end customer—insights from an ideally set up closed-loop supply chain

For successful operation of closed-loop supply chains, product acquisition from customers plays a key role. Most cases presented in the literature so far have looked at products that still have a considerable marginal value of time or short life cycles. In such cases, it seems more likely that customers would return products at the end of their life cycle. But for a wide range of products such as apparel, the opposite is the case. This paper presents a classification of products for end-of-life acquisition based on the marginal value of time and the product lifetime. In a second stage, transaction cost economics are discussed to evaluate the behaviour of end-customers regarding end-of-life returns. A modified version of the transaction cost analysis is taken up, which allows an assessment of the transaction costs incurred by customers for end-of-life returns. This will show that low transaction costs are vital for acquiring products at the end of their life. The case of ECOLOG is used to explore related issues and discuss the importance of including the final customer in planning such product return channels.

On the Missed Opportunity Cost, Gud, and Estimating Environmental Quality

The missed opportunity cost (MOC), i.e., all foregone alternatives while foraging in a patch, is an important aspect of the cost-benefit analysis of foraging patch use. When making between-environment comparisons it will often be the most important factor influencing behavior, but it has received less interest than other foraging costs. In this paper, we focus on differences between individuals living in different territories or home ranges and how giving-up densities of food (GUD) should reflect between-environment differences in habitat suitability. We then investigate the extent to which such differences depend on effects mediated through the cost of predation or MOC. We model different scenarios for individuals in different environments and review literature on empirical studies that investigate such scenarios. The modeling results show that all three components of the MOC (survival rate, marginal value of energy, and marginal value of time) depend on average resource availability in the environment. ...

Revealing Preferences for Leisure Time from Stated Preference Data

When consumer choice is constrained by time as well as money, willingness to pay can be defined with respect to either numeraire. The two measures can be related formally within a utility‐consistent model of choice subject to two constraints. Furthermore, when information is collected on both, the respondent's marginal value of time can be identified. A system of willingness to pay time and money and the marginal value of leisure time is estimated jointly in an application to California whalewatching and whale stock enhancement. The empirical approach can be applied with only minor additions to survey techniques for nonmarket valuation.

Empirical Specification Requirements for Two‐Constraint Models of Recreation Choice

AbstractTwo‐constraint models are common in recreation‐demand analysis because of the important role time can play in consumer choices. Two versions of Roy's identity hold for these models and imply coefficient restrictions on empirical demand functions. The two‐constraint restrictions are fully observable and can be expressed in a form analogous to the Slutsky‐Hicks equations in single‐constraint consumer models. Empirical specifications that use full prices and full budgets can be consistent with the two‐constraint models, when the marginal value of time is either exogenous or endogenous, but models with full prices and money income alone are not.

L'affectation du travail dans les exploitations agricoles : une application du modèle du ménage producteur et consommateur

Labour allocation on the farm : an application of the agricultural household model This paper is based on the neo-classical farm-household model. The aim is to show how this theoretical framework allows to characterize all the labour decisions of the farm household : the decision to use hired labour on farm and the decision to work off farm. Indeed, these decisions are joint and the model takes into account their simultaneity. An important feature of the analysis arises from the fact that we consider the labour market might be imperfect : hence, the cost of hired labour can be different from the off-farm wage rate. The farm household is defined as an economic entity and is assumed to maximise its utility function subject to income, time and non-negativity constraints. On-farm and off-farm family labour are assumed to be perfect substitutes in the utility function as well as family labour and hired labour in the production function despite their differential opportunity costs. The farm household model characterizes the rule for off-farm participation : the household will not work off farm when its marginal value of time from not participating in the off-farm labour market (its reservation wage) is greater than the wage rate offered off-farm. Hired labour is used on farm when the marginal value of hired labour equals its cost. Rational choice by agricultural households lead them to choose differential labour strategies and thus to belong to different labour regimes. The reduced form of the model defines six labour regimes depending on the value of the labour variables. The model is illustrated with the use of functional forms (Cobb-Douglas forms) for the utility and the production functions. This example allows to derive the different regimes and to point out on the case when the production decisions depend on the preferences of the household i.e. when the recurs ivity of the household behaviour does not hold. Furthermore the impact of the new Common Agricultural Policy on the labour decisions of the farm-household is studied. The comparative static of the reservation wage with respect to the instruments used in the new CAP regime allow the formation of hypotheses regarding how CAP will affect labour decisions.

Why U.S. Wage and Employment Behaviour Differs From That in Britain and Japan

If a poll were to be conducted among American academic economists to select 'The Most Mystifying Economic Phenomenon of Our Time,' surely the sticky nominal wage rate would emerge at or near the top of the list. The slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years, from Keynes' General Theory, down to the standard postwar textbook Keynesian paradigm, to the more modern fixed-wage-price models of Robert Barro and Herschel Grossman (I976), and Edmond Malinvaud (I977). Unwilling passively to accept nominal wage rigidity as an unexplained assumption, many labour-market theorists have followed the lead of Costas Azariadis (I975) and Martin Baily (I974) in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit-maximising calculus. As I pointed out in an early critique of the Azariadis-Baily model (I976a) their assumptions cannot explain cycles in employment, but rather why workers would want fixed incomes, i.e., a fixed wage rate and fixed employment. Soon thereafter, Barro (I977) went one step further and argued that contract theory is a 'facade' which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time. Now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle, simply because wages are not universally rigid. I document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes, as compared to changes in hours worked, is five to ten times greater in Britain and Japan than in