We examine two different models of manufacturer-retailer successive monopoly with retail demand uncertainty. In the first, both manufacturer and retailer are symmetrically uninformed about demand. Equilibrium exists if and only if the marginal costs of production and storage are sufficiently high, in which case the manufacturer offers a full-returns policy. Together with previous results, this shows that both the structure of the uncertainty and the timing of its resolution are critical factors affecting the scope for returns policies. In the second model, the manufacturer knows demand while the retailer does not. A full-returns policy is never offered in this case. Moreover, if any partial-returns policy is offered, it does not serve to signal the level of demand.
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Length: 25 pages Date of creation: 2001 Date of revision: Handle: RePEc:mlb:wpaper:821
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Find related papers by JEL classification: L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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Marvel, Howard P & Peck, James, 1995.
"Demand Uncertainty and Returns Policies,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 691-714, August.
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