Speculation in a two-stage retail supply chain

Tianke Feng and Joseph Geunes

IISE Transactions, 2014, vol. 46, issue 12, 1315-1328

Abstract: One perhaps surprising outcome of E-Commerce has been the emergence of speculators who resell products via the web. These speculators create retail shortages for popular products (e.g., toys) by removing them from store shelves in bulk and then selling them at inflated prices through secondary channels; e.g., on sites such as eBay. This article examines the impact of such speculation on ordering decisions in a two-stage manufacturer–retailer supply chain. The equilibrium results of the proposed model demonstrate a range of outcomes: in some cases both the retailer and manufacturer benefit from speculators, whereas in other cases, both may be hurt by a high number of speculators. The proposed model provides insight on when it is best for the manufacturer to take measures to preclude a high degree of speculation.

Date: 2014
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DOI: 10.1080/0740817X.2014.904975

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