Marketing|inventory interactions in the characterization of retailer response to manufacturer trade deals
This paper presents a characterization of a profit-maximizing retailer's response to a manufacturer trade deal that encompasses both marketing and operations concerns. Price pass-through behaviour is based on demand being realized over time, at a given rate, thereby allowing for the introduction of inventory-related costs. The analysis establishes a direct and positive link between the incidence of forward buying and the incidence of more-than-100% price pass-through policies. As a result, unless restricted by anti-hoarding policies, the profit-maximizing retailer's strategy tends towards large price reductions, but only for a small fraction of the units acquired at the discounted price. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 27 (2006)
Issue (Month): 7 ()
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- Ardalan, Alireza, 1995. "A comparative analysis of approaches for determining optimal price and order quantity when a sale increases demand," European Journal of Operational Research, Elsevier, vol. 84(2), pages 416-430, July.
- Scott A. Neslin & Stephen G. Powell & Linda Schneider Stone, 1995. "The Effects of Retailer and Consumer Response on Optimal Manufacturer Advertising and Trade Promotion Strategies," Management Science, INFORMS, vol. 41(5), pages 749-766, May.
- Sridhar Moorthy, 2005. "A General Theory of Pass-Through in Channels with Category Management and Retail Competition," Marketing Science, INFORMS, vol. 24(1), pages 110-122, August.
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