Capturing the Risk-Pooling Effect Through Demand Reshape

Amit Eynan () and Thierry Fouque ()
Additional contact information
Amit Eynan: John M. Olin School of Business, Washington University, St. Louis, Missouri 63130
Thierry Fouque: Department of Economics, Management, Mathematics, and Computer Sciences, University of Paris X, 92000 Nanterre Cedex, France

Management Science, 2003, vol. 49, issue 6, 704-717

Abstract: The risk-pooling effect has been documented to benefit inventory systems by reducing the need for safety stock and consequently lowering costs such as inventory holding and shortage penalty. In this paper, we propose a new approach, called "demand reshape," to take advantage of the risk-pooling effect. It is demonstrated that a company can improve its profit by encouraging some of its customers, who intended to purchase one product to switch to another. The effectiveness of this approach is evaluated in various scenarios and found to be very promising.

Keywords: Demand Reshape; Risk Pooling; Consolidation; Multiproduct; Substitution (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.49.6.704.16020 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:49:y:2003:i:6:p:704-717

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().