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Incentives through Inventory Control in Supply Chains

Author

Listed:
  • Zhan Qu
  • Horst Raff
  • Nicolas Schmitt

Abstract

The paper shows that taking inventory control out of the hands of competitive or exclusive retailers and assigning it to a manufacturer increases the value of a supply chain especially for goods whose demand is highly volatile. This is because doing so solves incentive distortions that arise when retailers have to allocate inventory across sales periods, and thus allows for better intertemporal price discrimination. Assigning inventory control to a manufacturer is also shown to have effects on total inventory and social welfare.

Suggested Citation

  • Zhan Qu & Horst Raff & Nicolas Schmitt, 2017. "Incentives through Inventory Control in Supply Chains," CESifo Working Paper Series 6705, CESifo.
  • Handle: RePEc:ces:ceswps:_6705
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6705.pdf
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    References listed on IDEAS

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    Cited by:

    1. Qu, Zhan & Raff, Horst, 2017. "Centralized versus decentralized inventory control in supply chains and the bullwhip effect," CEPIE Working Papers 17/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).

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    More about this item

    Keywords

    inventory; supply chain; demand uncertainty; storable good; price discrimination;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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