Abstract
Price promotions are temporary price cuts that suppliers offer to buyers. When promotions are sufficiently attractive, buyers choose to backlog some portion of demand in anticipation of a possible forward buy at the discounted price. While it has been shown that a backlog of orders as a normal business practice can be successful in certain situations, the potential benefits of such strategic stockouts in the context of price promotions are not fully understood. This paper explores these benefits while offering theoretical and managerial insights into the link between forward buying and strategic stockouts along with a practically appealing control policy.
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