Using sector-level survey data for the universe of Japanese firms, we establish positive co-movement in firm’s expectations about aggregate and sector-specific demand shocks. We show that a simple model with imperfect information on current components explains data. The predicts an increase relative volatility shocks compared to reduces sensitivity inflation changes demand. test corroborate the...

Problem definition: We consider the incentive design problem of a retailer that delegates stocking decisions to its store managers who are privately informed about local demand. Academic/practical relevance: Shortages highly costly in retail, but less concern for managers, as their exact amounts usually not recorded. In order align incentives and attain desired service levels, retailers need me...