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Marketing/inventory interactions in the characterization of retailer response to manufacturer trade deals

✍ Scribed by F. J. Arcelus; G. Srinivasan

Publisher: John Wiley and Sons
Year: 2006
Tongue: English
Weight: 154 KB
Volume: 27
Category: Article
ISSN: 0143-6570
DOI: 10.1002/mde.1272

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✦ Synopsis

This paper presents a characterization of a profit-maximizing retailer's response to a manufacturer trade deal that encompasses both marketing and operations concerns. Price pass-through behaviour is based on demand being realized over time, at a given rate, thereby allowing for the introduction of inventory-related costs. The analysis establishes a direct and positive link between the incidence of forward buying and the incidence of morethan-100% price pass-through policies. As a result, unless restricted by anti-hoarding policies, the profit-maximizing retailer's strategy tends towards large price reductions, but only for a small fraction of the units acquired at the discounted price.

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