Inventory Management and Endogenous Demand: Investigating the Role of Customer Referrals, Defections, and Product Market Failure

Oleg Sokolinskiy, Ben Sopranzetti, Dale Rogers, Rudolf Leuschner

    Research output: Contribution to journalArticle

    Abstract

    This article optimizes a finite population, dynamic, stochastic inventory model where future demand is endogenous to inventory policy. Specifically, satisfied customers are not only likely to remain with the firm, but may also refer new customers. In contrast, backorders and lost sales may cause disgruntled customers to defect and potentially cause them to dissuade new customers from doing business with the firm. Thus, inventory policy and customer demand are endogenous. Further, the model allows for the possibility that too many customer defections may lead to product market failure. The incorporation of these innovations into our model yields inventory policies that differ substantially from those reported in the literature, with the greatest differences occurring when the firm has low to medium market share.

    Original languageEnglish (US)
    Pages (from-to)118-141
    Number of pages24
    JournalDecision Sciences
    Volume50
    Issue number1
    DOIs
    StatePublished - Feb 1 2019

    Fingerprint

    Population dynamics
    Sales
    Innovation
    Defects
    Inventory management
    Product market
    Market failure
    Referral
    Industry
    Inventory policy
    Media markets
    Lost sales
    Stochastic inventory model
    Market share
    Backorder

    Keywords

    • Backorders
    • Customer Referrals
    • Customer Satisfaction
    • Dynamic Stochastic Programming
    • Inventory Management
    • Lost Sales
    • Market Share
    • Product Market Failure
    • Stochastic Endogenous Demand

    ASJC Scopus subject areas

    • Business, Management and Accounting(all)
    • Strategy and Management
    • Information Systems and Management
    • Management of Technology and Innovation

    Cite this

    Inventory Management and Endogenous Demand : Investigating the Role of Customer Referrals, Defections, and Product Market Failure. / Sokolinskiy, Oleg; Sopranzetti, Ben; Rogers, Dale; Leuschner, Rudolf.

    In: Decision Sciences, Vol. 50, No. 1, 01.02.2019, p. 118-141.

    Research output: Contribution to journalArticle

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