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Production, inventory and waiting time

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  • Gil S. Epstein

Abstract

In this paper, I introduce the idea of adjusting waiting time as an alternative to price adjustment in order to study the relationship between waiting time, demand, profits and inventories. In the model, demand depends on both price and waiting time. Consumers are willing to pay more if they do not have to wait long. I derive the conditions under which a monopoly may profit from utilizing the option of holding inventory by changing the waiting time facing the consumers. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1328
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 6 ()
Pages: 579-589

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Handle: RePEc:wly:mgtdec:v:28:y:2007:i:6:p:579-589

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May.
  2. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April.
  3. Slade, Margaret E, 1998. "Optimal Pricing with Costly Adjustment: Evidence from Retail-Grocery Prices," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 87-107, January.
  4. Daniel Levy & Shantanu Dutta & Mark Bergen & Robert Venable, 1998. "Price adjustment at multiproduct retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 81-120.
  5. Leif Danziger, 1998. "A Dynamic Economy with Costly Price Adjustment," Cahiers de recherche CREFE / CREFE Working Papers 83, CREFE, Université du Québec à Montréal.
  6. Paroush Jacob & Spiegel Uriel, 1995. "Price Discrimination with One-way Separated Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(3), pages 441-452.
  7. Haddock, David D & McChesney, Fred S, 1994. "Why Do Firms Contrive Shortages? The Economics of Intentional Mispricing," Economic Inquiry, Western Economic Association International, vol. 32(4), pages 562-81, October.
  8. Shantanu Dutta & Mark Bergen & Daniel Levy & Robert Venable, 2005. "Menu Costs, Posted Prices, and Multiproduct Retailers," Macroeconomics 0505007, EconWPA.
  9. Epstein, Gil S., 1996. "The extraction of natural resources from two sites under uncertainty," Economics Letters, Elsevier, vol. 51(3), pages 309-313, June.
  10. I.P.L. Png & David Reitman, 1994. "Service Time Competition," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 619-634, Winter.
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Cited by:
  1. Levy, Daniel, 2007. "Price Rigidity and Flexibility: Recent Theoretical Developments," MPRA Paper 2761, University Library of Munich, Germany.
  2. Georg Müller & Mark Bergen & Shantanu Dutta & Daniel Levy, 2007. "Non-price rigidity and cost of adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 817-832.

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