Centralization of Stocks: Retailers Vs. Manufacturer
Management Science
Pricing and the News Vendor Problem: a Review with Extensions
Operations Research
A General Framework for the Study of Decentralized Distribution Systems
Manufacturing & Service Operations Management
Selling to the Newsvendor: An Analysis of Price-Only Contracts
Manufacturing & Service Operations Management
A Two-Location Inventory Model with Transshipment and Local Decision Making
Management Science
Centralized and Competitive Inventory Models with Demand Substitution
Operations Research
Who Benefits from Transshipment? Exogenous vs. Endogenous Wholesale Prices
Management Science
Inventory Sharing and Rationing in Decentralized Dealer Networks
Management Science
Transshipment and Its Impact on Supply Chain Members' Performance
Management Science
Retail Assortment Planning in the Presence of Consumer Search
Manufacturing & Service Operations Management
Newsvendors Under Simultaneous Price and Inventory Competition
Manufacturing & Service Operations Management
Incentives for Transshipment in a Supply Chain with Decentralized Retailers
Manufacturing & Service Operations Management
TECHNICAL NOTE---Decentralized Inventory Sharing with Asymmetric Information
Operations Research
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A common phenomenon that occurs in any decentralized multilocation system is stock imbalance, whereby some locations have unsatisfied demands while others are overstocked. The system can be rebalanced by using a search process that is driven by either the customers or the retailers. In a customer-driven search (CDS), the customer with unmet demand may search for the product at another location and, if it is available, complete the purchase. In a retailer-driven search (RDS), the retailer with unsatisfied demand searches for product and schedules transshipment to fulfill the unmet demand at his location. Of course, the revenues generated through search in RDS need to be shared between the parties according to a transfer pricing scheme. In a setting of one manufacturer and two retailers with price-dependent and random demand, we explore the impact of the search method and the transfer price scheme used on the preferences of the manufacturer, the retailers, and the customers. With endogenous retail prices, we find that both the manufacturer and the retailers prefer RDS over CDS when they can design the transfer pricing scheme in RDS. Interestingly, neither party prefers the fixed transfer pricing scheme commonly assumed in the literature. Instead, transfer price that is proportional to the price of the retailer with either excess stock or excess demand is preferred. However, although both parties favor an RDS system when they can design the transfer pricing scheme in RDS, they may prefer RDS or CDS when the other party designs the RDS. Thus, the interests of the manufacturer and the retailers are rarely aligned. Customers benefit from a lower price in an RDS but at the expense of lower availability (as measured by the level of safety stock).