Inventory in Vertical Relationships with Private Information and Interdependent Values

International Journal of Economic Theory, Forthcoming

Duke Department of Economics Research Paper No. 36

21 Pages Posted: 14 Apr 2010 Last revised: 16 May 2010

See all articles by James J. Anton

James J. Anton

Duke University - Fuqua School of Business; Duke University - Department of Economics; Duke Innovation & Entrepreneurship Initiative

Gary Biglaiser

University of North Carolina

Tracy Lewis

Duke University

Date Written: February 4, 2010

Abstract

We study the use of inventory when a distributor is better informed about demand than a manufacturer. We find that when distributor and manufacturer values are interdependent it is optimal to endow the distributor with some inventory before it obtains its private information. We characterize the final allocation of the good and show that the distributor may have too few (many) units relative to the efficient allocation when demand is high (low).

Suggested Citation

Anton, James J. and Biglaiser, Gary and Lewis, Tracy, Inventory in Vertical Relationships with Private Information and Interdependent Values (February 4, 2010). International Journal of Economic Theory, Forthcoming , Duke Department of Economics Research Paper No. 36, Available at SSRN: https://ssrn.com/abstract=1589730 or http://dx.doi.org/10.2139/ssrn.1589730

James J. Anton (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0097
United States
919-660-7754 (Phone)
919-684-2818 (Fax)

Duke University - Department of Economics

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Gary Biglaiser

University of North Carolina ( email )

Chapel Hill, NC 27599
United States
919-966-4884 (Phone)
919-966-4986 (Fax)

Tracy Lewis

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
31
Abstract Views
866
PlumX Metrics