Firms can benefit from inaccurate market beliefs

Qijun Qiu, Li Jiang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

A supplier sells to a retailer who serves a market with uncertain demand. Before the season starts, the retailer preorders from the supplier, who stocks to satisfy at least the preorder. After the actual demand is realized, the retailer can place an at-once order, which is satisfied up to stock availability. Market demand, as perceived by a firm, can differ from what it actually is. We find that a firm can benefit from holding an inaccurate market belief.

Original languageEnglish
Pages (from-to)150-156
Number of pages7
JournalOperations Research Letters
Volume49
Issue number1
DOIs
Publication statusPublished - Jan 2021

Keywords

  • Contracting arrangement
  • Market belief
  • Newsvendor

ASJC Scopus subject areas

  • Software
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Applied Mathematics

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