  The inventories carried in a supply chain as a strategic tool to influence
the competing firms are considered to be strategic inventories (SI). We present
a two-period game-theoretic supply chain model, in which a singular
manufacturer supplies products to a pair of identical Cournot duopolistic
retailers. We show that the SI carried by the retailers under dynamic contract
is Pareto-dominating for the manufacturer, retailers, consumers, the channel,
and the society as well. We also find that the retailer's SI, however, can be
eliminated when the manufacturer commits wholesale contract or inventory
holding cost is too high. In comparing the cases with and without downstream
competition, we also show that the downstream Cournot duopoly undermines the
retailers in profits, but benefits all others.
