Work

Strategic inventories under limited commitment

Year: 2019

Type: article

Abstract: In a dynamic storable good market where demand changes over time, we investigate the producer's strategic incentives to hold inventories in response to the possibility of buyer stockpiling. The literature on storable goods has demonstrated that buyer stockpiling in anticipation of higher future prices harms the producer's profitability, particularly when the producer cannot commit to future prices. We show that the producer's inventories act as a strategic device to mitigate the loss from the lack of commitment. Our results provide a rationale for the producer's inventory behavior that sheds new light on the well‐documented empirical evidence about inventories.

Source: The RAND Journal of Economics

DOI: 10.1111/1756-2171.12292

Authors: Fabio Antoniou, Raffaele Fiocco

Institutions: University of Ioannina, Humboldt-Universität zu Berlin, University of Bergamo

Language: English

Topic: Supply Chain and Inventory Management

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funders: Freie Universität Berlin, Universität Duisburg-Essen, University of Ioannina

OpenAlex ID: W2750895703

FWCI: 1.331

Cites: 53

Cited by: 12

Related to: 10