Retailer's response to special sales: price discount vs. trade credit

Given the increasing saliency of special offers as a sales promotion tool, this paper analyses the advantages and disadvantages of the two most common payment reduction schemes, namely a decrease in the purchase price and a d elay in the payment of the merchandise. Following some of the latest empiri cal evidence in the sales promotion field, the model includes a price-depen dent demand, where price incorporates the ability of the retailer to pass o n some of the savings to the customers. The integration of both the purchas ing and the sale implications of the vendor's offer on the retailer's profi t forms an integral part of the model. A numerical example highlights the m ain features of the model. (C) 2001 Elsevier Science Ltd. All rights reserv ed.