The Effects of Capacity on Sales Under Alternative Vertical Contracts / Ioannis Ioannou, Julie Holland Mortimer, Richard Mortimer.

By:

Ioannou, Ioannis

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w14611.Publication details: Cambridge, Mass. National Bureau of Economic Research 2008.Description: 1 online resource: illustrations (black and white)Subject(s):

L0 - General

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Abstract: Retailer capacity decisions can impact sales for products by affecting, for example, availability and visibility. Using data from the U.S. video rental industry, we report estimates of the effect of capacity on sales. New monitoring technologies facilitated new supply contracts in this industry, which lowered the upfront costs of capacity and required minimum capacity purchases, strongly impacting stocking decisions. Under the traditional supply contract, capacity costs $44 per tape (avg) and the marginal tape produces 10.4 to 18.0 additional rentals. Under the new contract, capacity costs $7 per tape (avg) and the marginal tape produces 0 to 4.9 additional rentals.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w14611 (Browse shelf(Opens below))	Not For Loan

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December 2008.

Retailer capacity decisions can impact sales for products by affecting, for example, availability and visibility. Using data from the U.S. video rental industry, we report estimates of the effect of capacity on sales. New monitoring technologies facilitated new supply contracts in this industry, which lowered the upfront costs of capacity and required minimum capacity purchases, strongly impacting stocking decisions. Under the traditional supply contract, capacity costs $44 per tape (avg) and the marginal tape produces 10.4 to 18.0 additional rentals. Under the new contract, capacity costs $7 per tape (avg) and the marginal tape produces 0 to 4.9 additional rentals.