The authors show that a manufacturer facing uncertain demand and selling through a competitive retail market may wish to support adequate retail inventories by preventing the emergence of discount retailers. In their model, discounters offer low prices made possible by low probability of being saddled with unsold inventories in the event of slack demand. Full-price retailers are compensated for a higher probability of unsold inventories by a higher retail price when they sell. The authors show that preventing discounting increases the manufacturer's wholesale demand and profits, and they delineate demand conditions under which equilibrium inventory holding and consumer welfare increase. Copyright 1996, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 111 (1996) Issue (Month): 3 (August) Pages: 885-913 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Robert L. Earle & Karl Schmedders & Tymon Tatur, 2002.
"Price Caps and Uncertain Demands,"
Discussion Papers
1340, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]