We study the use of inventory when a distributor is better informed about demand than a manufacturer. We find that when distributor and manufacturer values are interdependent it is optimal to endow the distributor with some inventory before it obtains its private information. We characterize the...

This article examines the use of switching costs by long-lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show that when switching costs are high, a buyer may induce suppliers to price...