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Inventory management with simultaneously horizontal and vertical substitution

Authors
Journal
International Journal of Production Economics
0925-5273
Publisher
Elsevier
Volume
156
Identifiers
DOI: 10.1016/j.ijpe.2014.06.017
Keywords
  • Inventory Management
  • Inventory Competition
  • Stockout-Based Substitution

Abstract

Abstract In this study, we focus on inventory management issues under simultaneously horizontal (equivalently inter-brand) and vertical (equivalently intra-brand) substitution. The analysis is divided into two distinct scenarios: centralized inventory management, where all brands are managed by a central decision maker; and decentralized inventory management, where each brand is managed by an independent decision maker. For the two situations, the optimal and the equilibrium order quantities are developed. Moreover, we find that there exist situations when the order quantities are greater in the centralized setting than in the competitive setting for some products.

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