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Advance selling of new products considering retailers’ learning

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  • Chenhang Zeng

Abstract

When a retailer launches a new product, the lack of information on market size and consumer valuation lead to yield uncertainty for the retailer concerning demand and therefore lead to risks in production. Under advance selling, the pre‐orders may signal the future demand for the retailer, which helps to reduce demand uncertainty. This paper studies the retailer's optimal advance selling price and production quantity in a two‐period model where the demand uncertainty comes from both the market size and the distribution of consumer valuations. We characterize the conditions under which the retailer adopts advance selling and perform comparative statics analysis of the equilibrium.

Suggested Citation

  • Chenhang Zeng, 2020. "Advance selling of new products considering retailers’ learning," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(3), pages 306-328, September.
    • Handle: RePEc:bla:ijethy:v:16:y:2020:i:3:p:306-328
    DOI: 10.1111/ijet.12193
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    References listed on IDEAS

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    Cited by:

    1. Junshan Lin & Chenhang Zeng, 2023. "Pre-order strategies with demand uncertainty and consumer heterogeneity," The Japanese Economic Review, Springer, vol. 74(1), pages 83-115, January.

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