Are you a Manager in charge of Management of Inventory?

What you should know about Inventory Management and Consumer Psychology

Well, this is not a new thing to be discussed but nevertheless a research under Management Science
has been published by Gérard P. Cachon, Santiago Gallino, and Marcelo Olivares titled: Does Adding
Inventory Increase Sales? Evidence of a Scarcity Effect in U.S. Automobile Dealerships.

In the study of 1,289 General Motors dealerships over 30 weeks, researchers found that the limited
version of the car increased the sales whereas identical model saw a drop in sales. They found a
reason for this as the consumer have an assumption that the item that is in abundance will still be
available later and this often lead them to forget about the idea of purchasing.

Therefore, the researchers recommended that in order to properly manage an inventory, a company
have to prioritise the expansion of the variety of the model or in another word, maximize variety and
minimize the duplication of the model.