Demand Uncertainty, Inventories, and Resale Price Maintenance

Raymond Deneckere, Howard P. Marvel and James Peck

The Quarterly Journal of Economics, 1996, vol. 111, issue 3, 885-913

Abstract: We show that a manufacturer facing uncertain demand and selling through a competitive retail market may wish to support adequate retail inventories by preventing the emergence of discount retailers. In our model, discounters offer low prices made possible by low probability of being saddled with unsold inventories in the event of slack demand. Full-price retailers are compensated for a higher probability of unsold inventories by a higher retail price when they sell. We show that preventing discounting increases the manufacturer's wholesale demand and profits, and we delineate demand conditions under which equilibrium inventory holding and consumer welfare increase.

Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (74)

Downloads: (external link)
http://hdl.handle.net/10.2307/2946675 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Demand Uncertainty, Inventories, and Resale Price Maintainance (1995)
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:oup:qjecon:v:111:y:1996:i:3:p:885-913.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().