Returns System with Rebates

14 Pages Posted: 11 Oct 2012

See all articles by Tatsuhiko Nariu

Tatsuhiko Nariu

Kyoto University - Graduate School of Business and Administration

David Flath

Ritsumeikan University - Faculty of Economics

Atsuo Utaka

Kyoto University

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Date Written: November 2012

Abstract

We consider a variant of the newsvendor problem. Atomistic retailers each buy merchandise from a monopoly supplier for resale at a market‐determined common retail price that depends upon the total industry order quantity and upon a stochastic demand. After the orders are filled, the supplier learns the realization of demand but the retailers do not. We show that, in this setting, a returns system with rebates (with previously set buy‐back price for returns and ex post payments from the supplier to each retailer per unit actually sold) implements the optimal production and sales strategy, attaining maximum expected profit in the channel.

Suggested Citation

Nariu, Tatsuhiko and Flath, David J. and Utaka, Atsuo, Returns System with Rebates (November 2012). International Economic Review, Vol. 53, Issue 4, pp. 1243-1256, 2012, Available at SSRN: https://ssrn.com/abstract=2160165 or http://dx.doi.org/10.1111/j.1468-2354.2012.00719.x

Tatsuhiko Nariu (Contact Author)

Kyoto University - Graduate School of Business and Administration ( email )

Kyoto, 606-8501
Japan

David J. Flath

Ritsumeikan University - Faculty of Economics ( email )

1-1-1 Noji-Higashi
Kusatsu, Shiga 525-8577, Siga 525-8577
Japan

Atsuo Utaka

Kyoto University ( email )

Japan

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