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Rebates, Inventories, and Intertemporal Price Discrimination

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  • Ault, Richard W, et al

Abstract

We demonstrate that universally redeemed rebates can increase manufacturer profits by reducing the incentives of downstream retailers to hoard inventories when optimal wholesale prices vary predictably over time. By bypassing retailers and making direct contracts with buyers, the manufacturer can increase the variations in effective prices paid by consumers without concomitantly creating larger incentives for retailers to hold inventories. During profitable, high-demand periods, manufacturer revenues are ordinarily constrained by "competition" from retailer inventories, thus limiting profits. However, by selectively offering rebates to consumers while maintaining high wholesale prices, low-demand periods can be accommodated without inducing retailer hoarding. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Ault, Richard W, et al, 2000. "Rebates, Inventories, and Intertemporal Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 570-578, October.
    • Handle: RePEc:oup:ecinqu:v:38:y:2000:i:4:p:570-78
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    Citations

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    Cited by:

    1. Martín-Herrán, Guiomar & Sigué, Simon-Pierre, 2015. "Trade deals and/or on-package coupons," European Journal of Operational Research, Elsevier, vol. 241(2), pages 541-554.
    2. Caliskan-Demirag, Ozgun & (Frank) Chen, Youhua & Li, Jianbin, 2011. "Customer and retailer rebates under risk aversion," International Journal of Production Economics, Elsevier, vol. 133(2), pages 736-750, October.
    3. Zhang, Jianqiang, 2016. "The benefits of consumer rebates: A strategy for gray market deterrence," European Journal of Operational Research, Elsevier, vol. 251(2), pages 509-521.
    4. Andrew Sfekas & Dean R. Lillard, 2013. "Do Firms Use Coupons and In-store Discounts to Strategically Market Experience Goods Over the Consumption Life-Cycle? The Case of Cigarettes," NBER Working Papers 19310, National Bureau of Economic Research, Inc.
    5. Scott M. Gilpatric, 2009. "Slippage in Rebate Programs and Present-Biased Preferences," Marketing Science, INFORMS, vol. 28(2), pages 229-238, 03-04.
    6. Xin Chen & Chung‐Lun Li & Byong‐Duk Rhee & David Simchi‐Levi, 2007. "The impact of manufacturer rebates on supply chain profits," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(6), pages 667-680, September.
    7. Martín-Herrán, Guiomar & Sigué, Simon-Pierre & Zaccour, Georges, 2010. "The Dilemma of Pull and Push-Price Promotions," Journal of Retailing, Elsevier, vol. 86(1), pages 51-68.
    8. Winston Koh, 2006. "The micro-foundations of intertemporal price discrimination," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 393-410, January.
    9. Samir Mamadehussene, 2024. "Rebates Offered by a Multiproduct Firm," Marketing Science, INFORMS, vol. 43(1), pages 178-191, January.
    10. Winston T. H. Koh, 2005. "Household Demand, Network Externality Effects and Intertemporal Price Discrimination," Journal of Economics, Springer, vol. 84(1), pages 49-69, February.
    11. Lin, Zhibing, 2016. "Price promotion with reference price effects in supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 85(C), pages 52-68.
    12. Anil Arya & Brian Mittendorf, 2013. "Managing Strategic Inventories via Manufacturer-to-Consumer Rebates," Management Science, INFORMS, vol. 59(4), pages 813-818, April.
    13. Liang, Donghan & Li, Gang & Sun, Linyan & Chen, Yubao, 2013. "The role of rebates in the hybrid competition between a national brand and a private label with present-biased consumers," International Journal of Production Economics, Elsevier, vol. 145(1), pages 208-219.
    14. Chaudhuri, Malika & Calantone, Roger J. & Voorhees, Clay M. & Cockrell, Seth, 2018. "Disentangling the effects of promotion mix on new product sales: An examination of disaggregated drivers and the moderating effect of product class," Journal of Business Research, Elsevier, vol. 90(C), pages 286-294.
    15. MartI´n-Herrán, Guiomar & Sigué, Simon P., 2011. "Prices, promotions, and channel profitability: Was the conventional wisdom mistaken?," European Journal of Operational Research, Elsevier, vol. 211(2), pages 415-425, June.

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