Speaker: Joao Montez

London Business School

Date and Time: Thursday 24 September 2015 at 12.45 – 14.00
Location: Seminar room 327, 3rd. floor, Department of Economics, entrance: Fosswinckelsgt. 14
The seminar will be held in English

Title: Variable inventory costs intensify retail competition: the case for horizontal information sharing and manufacturer returns

On the topic: More often than not retailers must order stocks in advance to make them readily available to consumers on their shelves. Yet the extent to which retailers’ inventory cost is sunk or remains variable varies significantly from one product to another as unsold inventory may have some scrap value. Variations in the value to retailers of unsold stocks can be either exogenous or arise endogenously. As an example of the latter, manufacturers often let retailers return unsold goods for a fraction of the wholesale price – a practice that makes inventory cost less sunk and that has been widely documented in a variety of contexts and for a multitude of products. Several other tools can have a similar effect, when they require the retailer to pay a price per unit sold and a lower price per unit that remains unsold—- such as a wholesale price charged per unit delivered and an additional royalty paid per unit actually sold (the analysis of this paper naturally extends to all such tools)