No abstract

Firms selling goods whose quality level deteriorates over time often face difficult decisions when unsold inventory remains. Since the leftover product is often perceived to be of lower quality than the new product, carrying it over offers the firm a second selling opportunity, a product line extension to new and unsold units, and the ability to price discriminate. By doing so, however, the firm subjects sales of its new product to competition from the leftover product. We present a two period model that captures the effect of this competition on the firm's production and pricing decisions. We characterize the firm's optimal strategy and find conditions under which the firm is better off carrying all, some, or none of its leftover inventory. We also show that, compared to a firm that acts myopically in the first period, a firm that takes into account the effect of first period decisions on second period profits will price its new product higher and stock more of it in the first period. Thus, the benefit of having a second selling opportunity dominates the detrimental effect of cannibalizing sales of the second period new product.

Firms are increasingly seeking to harness the potential of social networks for marketing purposes. therefore, marketers are interested in understanding the antecedents and consequences of relationship formation within networks and in predicting interactivity among users. the authors develop an integrated statistical framework for simultaneously modeling the connectivity structure of multiple relationships of different types on a common set of actors. their modeling approach incorporates several distinct facets to capture both the determinants of relationships and the structural characteristics of multiplex and sequential networks. they develop hierarchical bayesian methods for estimation and illustrate their model with two applications: the first application uses a sequential network of communications among managers involved in new product development activities, and the second uses an online collaborative social network of musicians. the authors' applications demonstrate the benefits of modeling multiple relations jointly for both substantive and predictive purposes. they also illustrate how information in one relationship can be leveraged to predict connectivity in another relation.

Some firms use a curious pricing mechanism called "pay as you wish" pricing (PAYW). When PAYW is used, a firm lets consumers decide what a product is worth to them and how much they want to pay to get the product. This practice has been observed in a number of industries. In this paper, we theoretically investigate why and where PAYW can be a profitable pricing strategy relative to the conventional "pay as asked" pricing strategy (PAAP). We show that PAYW has a number of advantages over PAAP such that it is well suited for some industries but not for others. These advantages are: 1) PAYW helps a firm to maximally penetrate a market; 2) it allows a firm to price discriminate among heterogenous consumers; 3) it helps to moderate price competition. We derive conditions under which PAYW dominates PAAP and discuss ways to improve the profitability of PAYW.

Conventional wisdom in marketing holds that (1) retailer forward buying is a consequence of manufacturer trade promotions and (2) stockpiling units helps the retailer but hurts the manufacturer. This article provides a deeper understanding of forward buying by analyzing it within the context of manufacturer trade promotions, competition, and demand uncertainty. The authors find that regardless of whether the manufacturer offers a trade promotion, allowing the retailer to forward buy and hold inventory for the future can, under certain conditions, be beneficial for both parties. Disallowing forward buying by the retailer may lead the manufacturer to lower merchandising requirements and change the depth of the promotion. In competitive environments, there are situations in which retailers engage in forward buying because of competitive pressures in a prisoner's-dilemma situation. Finally, when the authors consider the case of uncertain demand, they find further evidence of strategic forward buying. In particular, the authors find cases in which the retailer orders a quantity that is higher than what it expects to sell in even the most optimistic demand scenario.