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Research Details
Inducing Forecast Revelation Through Restricted Returns
Abstract
We consider a supply chain consisting of one supplier selling through one retailer who faces a newsvendor problem. There is a positive probability that the retailer is capable of gaining improved demand information through costly forecasting. The supplier would like to induce the retailer to forecast and share that information. Restricting the retailer's ability to return unsold product would intuitively appear to be a viable way by which to provide the desired incentives. However, it is well known that a generous returns policy increases the supplier's profit. We explore this tension between providing incentives to forecast and capturing channel profits. We examine both price-based returns mechanisms and quantity-based returns mechanisms. Thus, a second objective of this research is to compare the relative performance of these two schemes.
Type
Working Paper
Author(s)
Date Published
2002
Citations
Lariviere, Martin. 2002. Inducing Forecast Revelation Through Restricted Returns.
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