Price Smoothing and Inventory

Yakov Amihud A · Haim Mendelson

78 citations0/0 files storedThe Review of Economic Studies

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Supply Chain and Inventory Management Merger and Competition Analysis Consumer Market Behavior and Pricing

Abstract

This paper explains the phenomenon of price rigidity (or price smoothing) as the outcome of the optimal inventory policy of a multi-period profit-maximizing firm under demand and output uncertainties. Price smoothing may be manifested in two forms. First, price changes may be moderated with respect to those implied by the demand function; and second, the firm may choose to restrict price fluctuations by establishing upper and/or lower bounds on prices. We show that the extent of the asymmetry in price smoothing depends on the relationship between the inventory holding cost and the backlog penalty cost. Our model accommodates a wide range of price behaviour as observed in empirical studies on the issue.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 78 citations exist upstream.

References

1963The Structure of Scientific Revolutions 1971Industrial Market Structure and Economic Performance.1977Inflation and Costs of Price Adjustment 1972A Theory of Monopolistic Price Adjustment 1981Output Fluctuations and Gradual Price Adjustment 1972Multiperiod monopoly under uncertainty

Cited by

1987The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics?1989Chapter 15 The theory and the facts of how markets clear: Is industrial organization valuable for understanding macroeconomics?2006A Fractiles Perspective to the Joint Price/Quantity Newsvendor Model 2016Supply and Demand Functions in Inventory Models 2013Dynamic Inventory–Pricing Control Under Backorder: Demand Estimation and Policy Optimization 2004Optimal Auctioning and Ordering in an Infinite Horizon Inventory-Pricing System 2005Beyond the Hype of Frictionless Markets: Evidence of Heterogeneity in Price Rigidity on the Internet

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.