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Inventory Sharing in the Presence of Commodity Markets

Title
Inventory Sharing in the Presence of Commodity Markets
Authors
Park, Seung JaeLai, GuomingSeshadri, Sridhar
Ewha Authors
박승재
SCOPUS Author ID
박승재scopus
Issue Date
2016
Journal Title
PRODUCTION AND OPERATIONS MANAGEMENT
ISSN
1059-1478JCR Link1937-5956JCR Link
Citation
vol. 25, no. 7, pp. 1245 - 1260
Keywords
Inventory sharingCommodity procurementTransshipment priceCompetition
Publisher
WILEY-BLACKWELL
Indexed
SCIE; SCOPUS WOS scopus
Abstract
This study investigates the value of inventory sharing in the presence of spot and forward markets. We consider a multi-period setting where two firms process a common commodity to meet stochastic demands. They can buy and sell the commodity through both the spot and forward markets. They can also share the commodity if one has leftover inventory while the other has excess demand. We first characterize the equilibrium strategies of the two firms. Our analysis reveals that in such a context, the value of inventory sharing is low when the forward price is directly used to value the sharing transactions. We then develop a structured trans-shipment price scheme that uses a linear combination of the spot and forward prices. We show that this method can substantially increase the value of inventory sharing. Our analysis also reveals that in the presence of liquid spot and forward markets, the value of inventory sharing mainly results from the difference of the transaction costs, and it increases if the market in which firms operate becomes more competitive.
DOI
10.1111/poms.12551
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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