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An optimal inventory management problem with reputation-dependent demand


  • Eugene Khmelnitsky


  • Gonen Singer



The paper addresses a problem of inventory control in a two-echelon retailer-customer setting. The problem incorporates the reputation of the retailer as a key factor influencing its policy. The retailer’s reputation depends on the degree to which past demand was satisfied. In turn, the reputation impacts the distribution of future demand. The optimality conditions developed by means of a perturbation analysis technique enable an optimal base-stock policy, in which the current level of base-stock depends on the retailer’s current reputation. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Eugene Khmelnitsky & Gonen Singer, 2015. "An optimal inventory management problem with reputation-dependent demand," Annals of Operations Research, Springer, vol. 231(1), pages 305-316, August.
  • Handle: RePEc:spr:annopr:v:231:y:2015:i:1:p:305-316:10.1007/s10479-014-1600-z
    DOI: 10.1007/s10479-014-1600-z

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    References listed on IDEAS

    1. Ernst, Ricardo & Powell, Stephen G., 1998. "Manufacturer incentives to improve retail service levels," European Journal of Operational Research, Elsevier, vol. 104(3), pages 437-450, February.
    2. Liberopoulos, George & Tsikis, Isidoros & Delikouras, Stefanos, 2010. "Backorder penalty cost coefficient "b": What could it be?," International Journal of Production Economics, Elsevier, vol. 123(1), pages 166-178, January.
    3. Joseph Hall & Evan Porteus, 2000. "Customer Service Competition in Capacitated Systems," Manufacturing & Service Operations Management, INFORMS, vol. 2(2), pages 144-165, November.
    4. repec:taf:uiiexx:v:41:y:2009:i:2:p:95-102 is not listed on IDEAS
    5. Barış Tan & Stanley Gershwin, 2004. "Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Volatile Demand," Annals of Operations Research, Springer, vol. 125(1), pages 205-232, January.
    6. Michael Bendixen & Russell Abratt, 2007. "Corporate Identity, Ethics and Reputation in Supplier–Buyer Relationships," Journal of Business Ethics, Springer, vol. 76(1), pages 69-82, November.
    7. repec:taf:uiiexx:v:42:y:2010:i:12:p:855-864 is not listed on IDEAS
    8. B. L. Schwartz, 1970. "Optimal Inventory Policies in Perturbed Demand Models," Management Science, INFORMS, vol. 16(8), pages 509-518, April.
    9. Benjamin L. Schwartz, 1966. "A New Approach to Stockout Penalties," Management Science, INFORMS, vol. 12(12), pages 538-544, August.
    10. repec:taf:uiiexx:v:41:y:2009:i:6:p:511-523 is not listed on IDEAS
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    1. repec:spr:annopr:v:271:y:2018:i:2:d:10.1007_s10479-018-2754-x is not listed on IDEAS
    2. repec:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-016-2355-5 is not listed on IDEAS


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