​It is widely accepted that the retailer’s use of strategic inventory can mitigate double marginalization and improve supply chain coordination. However, the recent literature of channel coordination only considers the effects of the retailer’s strategic inventory, leaving the...

Problem definition: This paper studies a supply chain in which a manufacturer sells a product to consumers through a retailer. The retailer makes an endogenous demand improvement decision on whether or not to increase the potential market base, which is imperfectly observed by the manufacturer....