Abstract-We explore the use of option contracts as a means of managing and controlling inventories in a retail market. Specifically, merchants can buy option contracts on unsold inventories of retail goods in an effort to hedge, pool, or transfer risk. We propose a new kind of European put option

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, but at a reduced

While every firm in a supply chain bears supply risk (the cost of insufficient supply), some firms may, even with wholesale price contracts, completely avoid inventory risk (the cost of unsold inventory). With a push contract there is a single wholesale price and the retailer, by ordering his

In this paper we experimentally investigate how the allocation of inventory risk in a two-stage supply chain affects channel efficiency. We first evaluate two common wholesale price contracts that differ in which party incurs the risk associated with unsold inventory; a push contract in which

the contract period, thus requiring that the option writer purchase any unsold inventory at a specified strike price. However, to improve market efficiency this option contract allows the retailer to freely adjust the sale price of the underlying good throughout the contract period. As the retailer is expected

a loss of billions of dollars in unsold inventory.

time period. The analysis is done by building on a classical result of Derman. The demand at each retailer is described by a probability density function and unsold portions of the supply lose their value at the end of the period. Key–Words: Inventory Control, Nonlinear Optimization 1

pattern and ship residual inventories in order to meet residual demands. Unsold inventories are salvaged at the end of the period. We compare two methods for distribution of residual profit -transshipment prices (TP) and dual allocations (DA) -that were previously analyzed in literature. Transshipment

T his paper examines three channel policies that are used in declining price environments: Price protection (P) is a mechanism under which the manufacturer pays the retailer a credit applying to the retailer's unsold inventory when the wholesale price drops during the life cycle; midlife

Fast-fashion retailers such as Zara offer continuously changing assortments and use minimal in-season promotions. Their clearance pricing problem is thus challenging because it involves comparatively more different articles of unsold inventory with less historical price data points. Until 2007