Gaining More by Stocking Less: A Competitive Analysis of Product Availability
The price competition between two firms can affect their decisions about product availability. With occasional stockouts a firm loses from foregone sales, yet it may indirectly benefit from the higher price a competitor is able to charge. The more prone customers are to search elsewhere for the product upon encountering a stockout, the greater is the gain from the reduced price competition between firms. This paper establishes conditions whereby the strategic interaction of reduced price competition between firms outweighs the loss from foregone sales. In such cases, a firm can increase its expected profits by choosing to stock less. These results provide a competitive rationale for the high stockout levels observed in some retail situations and have implications for the analysis of product availability in public policy settings.
Volume (Year): 13 (1994)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:13:y:1994:i:1:p:3-22. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.