【 The Digital Star Seminar Series No.31 】Inventory Management in Markets with Search Frictions

Date: 9 December 2022 (Fri) 
Time: 9:00am - 10:30am (Hong Kong Time, UTC+8)
Platform: Tencent Meeting (ID 652-410-102)

Host: Prof. Miaojun Wang (School of Economics, Zhejiang University)

Presenter: Prof. Fei Li (University of North Carolina at Chapel Hill)

Abstract：

We present a directed search model of intermediaries with dynamic inventory and revenue management. Buyers purchase goods produced by sellers through intermediaries. Search frictions create demand uncertainty and make instantaneous replenishment impossible. To avoid the risk of stock-out, intermediaries hold inventory and employ inventory-based pricing and ordering policies. In equilibrium, when inventory is high, the intermediary posts a lower retail price to speed up sales and depresses wholesale price to slow down purchases, generating unimodal steady-state distributions of both inventory holdings and retail prices. Using a dataset that contains detailed information on used-car listings, we examine the dynamics of car dealers' inventories, new orders, sales, and retail prices and find evidence supporting the theory. We calibrate the model and show that (i) the proposed mechanism can generate a substantial amount of observed price dispersion, and (ii) our calibration attributes a substantial proportion of intermediaries' value to inventory management.

Intro to Prof. Fei Li:

Fei Li is a doctor of economics at the University of Pennsylvania, an associate professor of economics at the University of North Carolina at Chapel Hill, and an associate editor of Rand Journal of Economics.He published papers in Review of Economic Studies, Journal of Finance, American Economic Journal: Microeconomics, Games and Economic Behavior, International Economic Review, Journal of Economic Theory, Rand Journal of Economics, Theoretical Economics and other journals. His paper Star Ratings and the Incentives of Mutual Funds won the Outstanding Achievement Award of China Information Economics 2020.

Organization：

- The Chinese University of Hong Kong-Zhejiang University Joint Research Center for Digital Economy

- China Digital Economy Research Center of School of Economics, Zhejiang University

- Zhejiang University Digital Economy Innovation Research Team

Intro to The Digital Star Seminar Series：

The Digital Star Seminar Series is co-hosted by the China Digital Economy Research Center of School of Economics, Zhejiang University, and the Chinese University of Hong Kong-Zhejiang University Joint Research Center for Digital Economy. This series of seminars will study the development of the digital economy and China's economic transformation based on the practice of China's digital transformation. We will invite domestic and overseas scholars to share and discuss the latest research on the digital economy and the Chinese economy. We hope that this academic platform can become a paradise for the study of the digital economy. More importantly, it can generate insights that significantly impact the digital economy and Chinese economy, which will help promote digital transformation and high-quality economic development in Chinese society.