Rebates, inventories, and intertemporal price discrimination |
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| Authors: | RW Ault TR Beard DN Laband RP Saba |
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| Affiliation: | Associate Profesor of Economics, Auburn University, Auburn, AL 36849, USA Phone 1 334 844 2919 Fax: 1 334 844 4615 E-mail:;Associate Profesor of Economics, Auburn University, Auburn, AL 36849, USA Phone 1 334 844 2919 Fax: 1 334 844 4615 E-mail:;Profesor, Forest Policy Center, 205 M. White Smith Bldg., Auburn University, Auburn, AL 36849, USA Phone: 1 334 844 1074 Fax: 1 334 844 1084 E-mail:;Associate Profesor of Economics, Auburn University, Auburn, AL 36849, USA Phone 1 334 844 2919 Fax: 1 334 844 4615 E-mail: |
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| Abstract: | We demonstrate that universally redeemed rebates can increase manufacturer profits by reducing the incentives of downstream retailers to hoard inventories when optimal wholesale prices vary predictably over time. By bypassing retailers and making direct contracts with buyers, the manufacturer can increase the variations in effective prices paid by consumers without concomitantly creating larger incentives for retailers to hold inventories. During profitable, high-demand periods, manufacturer revenues are ordinarily constrained by'competition'from retailer inventories, thus limiting profits. However, by selectively offering rebates to consumers while maintaining high wholesale prices, low-demand periods can be accommodated without inducing retailer hoarding. |
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