Optimal price skimming by a monopolist facing rational consumers
Management Science
Management of Multi-Item Retail Inventory Systems with Demand Substitution
Operations Research
Stocking Retail Assortments Under Dynamic Consumer Substitution
Operations Research
Reward Programs and Tacit Collusion
Marketing Science
Note: The Newsvendor Model with Endogenous Demand
Management Science
Who Benefits from Transshipment? Exogenous vs. Endogenous Wholesale Prices
Management Science
Measuring and Mitigating the Costs of Stockouts
Management Science
Stockout Compensation: Joint Inventory and Price Optimization in Electronic Retailing
INFORMS Journal on Computing
Intertemporal Pricing with Strategic Customer Behavior
Management Science
Strategic Capacity Rationing to Induce Early Purchases
Management Science
Optimal Pricing of Seasonal Products in the Presence of Forward-Looking Consumers
Manufacturing & Service Operations Management
Optimal Pricing with Speculators and Strategic Consumers
Management Science
International Journal of Electronic Finance
Dynamic Purchase Decisions Under Regret: Price and Availability
Decision Analysis
A note on demand functions with uncertainty
Operations Research Letters
Markdown Pricing with Unknown Fraction of Strategic Customers
Manufacturing & Service Operations Management
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This paper studies the role of product availability in attracting consumer demand. We start with a newsvendor model, but additionally assume that stockouts are costly to consumers. The seller sets an observable price and an unobservable stocking quantity. Consumers anticipate the likelihood of stockouts and determine whether to visit the seller. We characterize the rational expectations equilibrium in this game. We propose two strategies that the seller can use to improve profits: (i) commitment (i.e., the seller, ex ante, commits to a particular quantity) and (ii) availability guarantees (i.e., the seller promises to compensate consumers, ex post, if the product is out of stock). Interestingly, the seller has an incentive to overcompensate consumers during stockouts, relative to the first-best benchmark under which social welfare is maximized. We find that first-best outcomes do not arise in equilibrium, but can be supported when the seller uses a combination of commitment and availability guarantees. Finally, we examine the robustness of these conclusions by extending our analysis to incorporate dynamic learning, multiple products, and consumer heterogeneity.