Demand uncertainty, inventory, and cost structure

• Main Authors: Chang, Xin, Kwok, Wing Chun, Wong, George
• Other Authors: Nanyang Business School
• Format: Article
• Language: English
• Published: 2024
• Subjects: Business and Management; Congestion costs; Cost structure
• Online Access: https://hdl.handle.net/10356/178349
• Institution: Nanyang Technological University

Building on Banker, Byzalov, and Plehn-Dujowich's (2014, The Accounting Review, 89(3), 839–865) congestion cost theory, we model firms' trade-off between a rigid cost structure and a high inventory level to reduce the congestion costs caused by uncertain demand. We demonstrate that firms w...