Note: The Newsvendor Model with Endogenous Demand
Management Science
A Two-Location Inventory Model with Transshipment and Local Decision Making
Management Science
Inventory Competition Under Dynamic Consumer Choice
Operations Research
Centralized and Competitive Inventory Models with Demand Substitution
Operations Research
An Econometric Analysis of Inventory Turnover Performance in Retail Services
Management Science
Association Between Supply Chain Glitches and Operating Performance
Management Science
What Can Be Learned from Classical Inventory Models? A Cross-Industry Exploratory Investigation
Manufacturing & Service Operations Management
Estimating Demand Uncertainty Using Judgmental Forecasts
Manufacturing & Service Operations Management
Drivers of Finished-Goods Inventory in the U.S. Automobile Industry
Management Science
Manufacturing & Service Operations Management
Impact of Variety and Distribution System Characteristics on Inventory Levels at U.S. Retailers
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
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We study the following question: How does competition influence the inventory holdings of General Motors' dealerships operating in isolated U.S. markets? We wish to disentangle two mechanisms by which local competition influences a dealer's inventory: (1) the entry or exit of a competitor can change a retailer's demand (a sales effect); and (2) the entry or exit of a competitor can change the amount of buffer stock a retailer holds, which influences the probability that a consumer finds a desired product in stock (a service-level effect). Theory is clear on the sales effect---an increase in sales leads to an increase in inventory (albeit a less than proportional increase). However, theoretical models of inventory competition are ambiguous on the expected sign of the service-level effect. Via a Web crawler, we obtained data on inventory and sales for more than 200 dealerships over a six-month period. Using cross-sectional variation, we estimated the effect of the number and type of local competitors on inventory holdings. We used several instrumental variables to control for the endogeneity of market entry decisions. Our results suggest that the service-level effect is strong, nonlinear, and positive. Hence, we observe that dealers carry more inventory (controlling for sales) when they face additional competition.