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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