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| Author: | Lee, H.L. (et al.) |
| Title: | Price protection in the personal computer industry |
| Journal: | Management Science
2000 : APR, VOL. 46:4, p. 467-482 |
| Index terms: | Computer industry Inventory control Incentives Pricing Policy |
| Freeterms: | Supply chains |
| Language: | eng |
| Abstract: | Price protection is commonly used practice between manufacturers and retailers in the personal computer industry. It is shown that price protection is an instrument for channel coordination. For products with long manufacturing lead times a properly chosen price protection credit coordinates the channel. For products with shorter manufacturing lead times, so the retailer has two buying opportunities, price protection alone can not guarantee channel coordination when wholesale prices are exogenous. In the 2-buying-opportunity setting with fixed wholesale prices, it is shown that price protection has 2 primary impacts: 1. shifting sales forward in time, and 2. increasing total sales. |
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