Can inventory chaos be welfare improving

This study demonstrates the possibility that chaotic fluctuations may be pr eferable to a steady state. For this purpose, it uses a simple macro disequ ilibrium model in which inventory can be chaotically fluctuated. In such a model, the profit of a firm as well as the utility of a consumer fluctuates . This raises the question of their average profitability and preferability in the long run. This study, with the aid of numerical examples, demonstra tes that the long-run average profit can be greater than the profit obtaine d at the steady state while the long-run average utility is the same as the utility obtained at the steady state. (C) 2001 Elsevier Science B.V. All r ights reserved.