RETURNS SYSTEM WITH REBATES

Tatsuhiko Nariu, David Flath () and Atsuo Utaka

International Economic Review, 2012, vol. 53, issue 4, 1243-1256

Abstract: We consider a variant of the newsvendor problem. Atomistic retailers each buy merchandise from a monopoly supplier for resale at a market‐determined common retail price that depends upon the total industry order quantity and upon a stochastic demand. After the orders are filled, the supplier learns the realization of demand but the retailers do not. We show that, in this setting, a returns system with rebates (with previously set buy‐back price for returns and ex post payments from the supplier to each retailer per unit actually sold) implements the optimal production and sales strategy, attaining maximum expected profit in the channel.

Date: 2012
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https://doi.org/10.1111/j.1468-2354.2012.00719.x

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Working Paper: Returns System with Rebates (2009)
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