Markdown Competition

  • Seungjin Whang
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 122)


We present a stylized model of markdown competition. We consider two retailers who compete in a market with a fixed level of initial inventory. The initial inventory level is only known to the retailer, and not to the other. To maximize the profit, each retailer would mark down at a time of his individual choice. The model assumes deterministic demands, a single chance of price change, and a prefixed set of prices. We consider a two-parameter strategy set where a retailer chooses the timing of markdown as a function of the current time, his inventory level and the other’s move so far. We characterize the equilibrium of the game and derive managerial insights.


Inventory Level Equilibrium Strategy Reservation Price Expected Profit Demand Rate 
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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Seungjin Whang
    • 1
  1. 1.Graduate School of BusinessStanford UniversityStandfordUSA

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