Classical reasons for carrying inventory include fixed (nonlinear) production or procurement costs, lead times, nonstationary or uncertain supply/demand, and capacity constraints. The last decade has seen active research in supply chain coordination focusing on the role of incentive contracts to...

A well-known result in inventory theory is that physical centralization of stocks in a system with multiple retailers decreases total costs and increases total profits for the retailers. However, does this centralization also benefit the manufacturer, whose goods the retailers stock, when...

We develop a general framework for the analysis of decentralized distribution systems. We carry the analysis in terms of a simplified model which entails N retailers who face stochastic demands and hold stocks locally and/or at one or more central locations. An exogenously specified fraction of...

We investigate the role of options (contingent claims) in a buyer-supplier system. Specifically using a two-period model with correlated demand, we illustrate how options provide flexibility to a buyer to respond to market changes in the second period. We also study the implications of such...