Markdown Competition

Seungjin Whang
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Seungjin Whang: Stanford University

Chapter Chapter 12 in Retail Supply Chain Management, 2008, pp 293-307 from Springer

Abstract: Abstract We present a stylized model of markdown competition. We consider two retailers who compete in a market with a fixed level of initial inventory. The initial inventory level is only known to the retailer, and not to the other. To maximize the profit, each retailer would mark down at a time of his individual choice. The model assumes deterministic demands, a single chance of price change, and a prefixed set of prices. We consider a two-parameter strategy set where a retailer chooses the timing of markdown as a function of the current time, his inventory level and the other’s move so far. We characterize the equilibrium of the game and derive managerial insights.

Keywords: Inventory Level; Equilibrium Strategy; Reservation Price; Expected Profit; Demand Rate (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-0-387-78903-3_12

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DOI: 10.1007/978-0-387-78902-6_12

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