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Strategic inventories under limited commitment

Author

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  • Antoniou, Fabio
  • Fiocco, Raffaele
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 profi tability, 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. Keywords: buyer stockpiling, commitment, storable goods, strategic inventories. JEL Classifi cation: D21, D42, L12.

Suggested Citation

  • Antoniou, Fabio & Fiocco, Raffaele, 2017. "Strategic inventories under limited commitment," Working Papers 2072/306512, Universitat Rovira i Virgili, Department of Economics.
    • Handle: RePEc:urv:wpaper:2072/306512
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    References listed on IDEAS

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    Cited by:

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    3. Lang Xiong & Tingting Xiao & Fuhai Nie, 2022. "Group Buying of Competing Retailers with Strategic Inventory," Sustainability, MDPI, vol. 14(20), pages 1-18, October.
    4. Henry Thille & Sebastien Mitraille, 2022. "Advance sales and deterrence with heterogeneous firms," Working Papers 2201, University of Guelph, Department of Economics and Finance.
    5. Lenhard, Severin, 2022. "Imperfect competition with costly disposal," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    6. Amihai Glazer & Refael Hassin & Irit Nowik, 2019. "How Advance Sales can Reduce Profits: When to Buy, When to Sell, and What Price to Charge," Papers 1912.02869, arXiv.org, revised Apr 2023.
    7. Severin Lenhard, 2021. "Imperfect Competition with Costly Disposal," Diskussionsschriften dp2105, Universitaet Bern, Departement Volkswirtschaft.
    8. Fabio Antoniou & Raffaele Fiocco, 2023. "Storable Good Market With Intertemporal Cost Variations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 361-385, February.

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    More about this item

    Keywords

    Conducta organitzacional; Monopolis; 338 - Situació econòmica. Política econòmica. Gestió; control i planificació de l'economia. Producció. Serveis. Turisme. Preus;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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