Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

3-2003

Publication Source

Operations Research

Volume

51

Issue

2

Start Page

329

Last Page

335

DOI

10.1287/opre.51.2.329.12788

Abstract

A standard problem in operations literature is optimal stocking of substitutable products. We consider a consumer-driven substitution problem with an arbitrary number of products under both centralized inventory management and competition. Substitution is modeled by letting the unsatisfied demand for a product flow to other products in deterministic proportions. We obtain analytically tractable solutions that facilitate comparisons between centralized and competitive inventory management under substitution. For the centralized problem we show that, when demand is multivariate normal, the total profit is decreasing in demand correlation.

Keywords

Inventory/production, stochastic, multiproduct: substitution, Games/group decisions, noncooperative: Nash equilibrium

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Date Posted: 27 November 2017

This document has been peer reviewed.