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Production, Inventory and Waiting Time

Gil S. Epstein
Managerial and Decision Economics
Vol. 28, No. 6, Price Rigidity and Flexibility: Recent Theoretical Developments (Sep., 2007), pp. 579-589
Published by: Wiley
Stable URL: http://www.jstor.org/stable/25151543
Page Count: 11
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Production, Inventory and Waiting Time
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Abstract

In this paper, I introduce the idea of adjusting waiting time as an alternative to price adjustment in order to study the relationship between waiting time, demand, profits and inventories. In the model, demand depends on both price and waiting time. Consumers are willing to pay more if they do not have to wait long. I derive the conditions under which a monopoly may profit from utilizing the option of holding inventory by changing the waiting time facing the consumers.

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