Supply Chain Coordination Under Channel Rebates with Sales Effort Effects
Management Science
Reply to "Do Returns Policies Intensify Retail Competition?"
Marketing Science
Sale Timing in a Supply Chain: When to Sell to the Retailer
Manufacturing & Service Operations Management
Does a Manufacturer Benefit from Selling to a Better-Forecasting Retailer?
Management Science
Equilibrium Returns Policies in the Presence of Supplier Competition
Marketing Science
Dynamic Supplier Contracts Under Asymmetric Inventory Information
Operations Research
The Value of Collaborative Forecasting in Supply Chains
Manufacturing & Service Operations Management
Product Line Design with Deliberation Costs: A Two-Stage Process
Decision Analysis
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This paper studies a manufacturer that sells to a newsvendor retailer who can improve the quality of her demand information by exerting costly forecasting effort. In such a setting, contracts play two roles: providing incentives to influence the retailer's forecasting decision and eliciting information obtained by forecasting to inform production decisions. We focus on two forms of contracts that are widely used in such settings and are mirror images of one another: a rebates contract, which compensates the retailer for the units she sells to end consumers, and a returns contract, which compensates the retailer for the units that are unsold. We characterize the optimal rebates contracts and returns contracts. Under rebates, the retailer, manufacturer, and total system may benefit from the retailer having inferior forecasting technology; this never occurs under returns. Although one might conjecture that returns would be inferior because its provision of “insurance” would discourage the retailer from forecasting, we show that returns are superior.