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Sale Timing in a Supply Chain: When to Sell to the Retailer

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  • Terry A. Taylor

    () (Graduate School of Business, Columbia University, New York, New York 10027)

Abstract

A fundamental decision for any manufacturer is when to sell to a downstream retailer. A manufacturer can sell either early, i.e., well in advance of the selling season, or late, i.e., close to the selling season. This paper examines the impact of information asymmetry, retailer sales effort, and contract type on the manufacturer's sale-timing decision. We find that if information is symmetric, demand is not influenced by sales effort, and the contract specifies that the price paid is linear in the order quantity, the manufacturer prefers to sell late. This result extends to the case where the retailer exerts sales effort during the selling season. However, if the retailer exerts sales effort prior to the selling season or has superior information about market demand, the manufacturer may prefer to sell early. We characterize the manufacturer's sale-timing preference in these settings, providing clear conditions under which the manufacturer prefers to sell either early or late. We show that the retailer, manufacturer, and total system may be hurt by the retailer's having higher-quality information.

Suggested Citation

  • Terry A. Taylor, 2006. "Sale Timing in a Supply Chain: When to Sell to the Retailer," Manufacturing & Service Operations Management, INFORMS, vol. 8(1), pages 23-42, November.
  • Handle: RePEc:inm:ormsom:v:8:y:2006:i:1:p:23-42
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    File URL: http://dx.doi.org/10.1287/msom.1050.0089
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Li, Hantao & Ritchken, Peter & Wang, Yunzeng, 2009. "Option and forward contracting with asymmetric information: Valuation issues in supply chains," European Journal of Operational Research, Elsevier, vol. 197(1), pages 134-148, August.
    2. Mobini, Z. & van den Heuvel, W. & Wagelmans, A.P.M., 2014. "Designing multi-period supply contracts in a two-echelon supply chain with asymmetric information," Econometric Institute Research Papers EI2014-28, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. Terry A. Taylor & Wenqiang Xiao, 2010. "Does a Manufacturer Benefit from Selling to a Better-Forecasting Retailer?," Management Science, INFORMS, vol. 56(9), pages 1584-1598, September.
    4. repec:gam:jsusta:v:9:y:2017:i:6:p:961-:d:100655 is not listed on IDEAS
    5. Wang, Xunxiao & Wu, Chongfeng & Xu, Weidong, 2015. "When to buy or sell in supply chains with the presence of mergers," International Journal of Production Economics, Elsevier, vol. 163(C), pages 137-145.
    6. Sang-Hyun Kim & Serguei Netessine, 2013. "Collaborative Cost Reduction and Component Procurement Under Information Asymmetry," Management Science, INFORMS, vol. 59(1), pages 189-206, November.
    7. Terry A. Taylor & Wenqiang Xiao, 2009. "Incentives for Retailer Forecasting: Rebates vs. Returns," Management Science, INFORMS, vol. 55(10), pages 1654-1669, October.
    8. Jian Li & Suresh Chand & Maqbool Dada & Shailendra Mehta, 2009. "Managing Inventory Over a Short Season: Models with Two Procurement Opportunities," Manufacturing & Service Operations Management, INFORMS, pages 174-184.
    9. Dai, Jiansheng & Meng, Weidong, 2015. "A risk-averse newsvendor model under marketing-dependency and price-dependency," International Journal of Production Economics, Elsevier, vol. 160(C), pages 220-229.
    10. Lingxiu Dong & Kaijie Zhu, 2007. "Two-Wholesale-Price Contracts: Push, Pull, and Advance-Purchase Discount Contracts," Manufacturing & Service Operations Management, INFORMS, pages 291-311.
    11. Moon, Yongma & Yao, Tao & Park, Sungsoon, 2011. "Price negotiation under uncertainty," International Journal of Production Economics, Elsevier, vol. 134(2), pages 413-423, December.
    12. Löffler, Clemens & Pfeiffer, Thomas & Schneider, Georg, 2012. "Controlling for supplier switching in the presence of real options and asymmetric information," European Journal of Operational Research, Elsevier, vol. 223(3), pages 690-700.
    13. Ozer, Ozalp & Uncu, Onur & Wei, Wei, 2007. "Selling to the "Newsvendor" with a forecast update: Analysis of a dual purchase contract," European Journal of Operational Research, Elsevier, vol. 182(3), pages 1150-1176, November.
    14. Eyal Biyalogorsky & Oded Koenigsberg, 2010. "Ownership coordination in a channel: Incentives, returns, and negotiations," Quantitative Marketing and Economics (QME), Springer, vol. 8(4), pages 461-490, December.
    15. repec:eee:proeco:v:188:y:2017:i:c:p:128-138 is not listed on IDEAS
    16. Lai, Guoming & Debo, Laurens G. & Sycara, Katia, 2009. "Sharing inventory risk in supply chain: The implication of financial constraint," Omega, Elsevier, vol. 37(4), pages 811-825, August.
    17. Ma, Peng & Wang, Haiyan & Shang, Jennifer, 2013. "Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts," International Journal of Production Economics, Elsevier, vol. 146(2), pages 745-755.

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