Early versus delayed order commitments in multi-retailer inventory systems
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abstract
We consider the implications of order commitment policies in terms of expected profits under demand uncertainty. Specifically, we investigate a system with multiple retailers and a single supplier in a single period context where one of the retailers is the primary customer of the supplier. In the base model, the primary customer orders after observing demand, and the supplier rations its production to retailers. In the early commitment model, the primary retailer orders before the selling season and receives her order in full. Comparing the multi-retailer system with a single-retailer model, we highlight the differences in the supply chain members' preferences.
