Learning in Advance Selling with Heterogeneous Consumers
AbstractThe advance selling strategy is implemented when a firm offers consumers the opportunity to order its product in advance of the regular selling season. Advance selling reduces uncertainty for both the firm and the buyer and enables the firm to update its forecast of future demand. The distinctive feature of the present study of advance selling is that we divide consumers into two groups, experienced and inexperienced. Experienced consumers know their valuations of the product in advance. The presence of experienced consumers yields new insights. Specifically, pre-orders from experienced consumers lead to a more precise forecast of future demand by the firm. We show that the firm will always adopt advance selling and that the optimal pre-order price may be at a discount or a premium relative to the regular selling price.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 12-08.
Length: 32 pages
Date of creation: Jul 2012
Date of revision: Sep 2012
Contact details of provider:
Web page: http://www.NETinst.org/
advance selling; the Newsvendor Problem; demand uncertainty; experienced consumers; inexperienced consumers.;
Other versions of this item:
- Oksana Loginova & X. Henry Wang & Chenhang Zeng, 2012. "Learning in Advance Selling with Heterogeneous Consumers," SDU Working Papers 2012-02, School of Economics, Shandong University.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Özalp Özer & Wei Wei, 2006. "Strategic Commitments for an Optimal Capacity Decision Under Asymmetric Forecast Information," Management Science, INFORMS, vol. 52(8), pages 1238-1257, August.
- Chenhang Zeng, 2012.
"Optimal Advance Selling Strategy under Price Commitment,"
SDU Working Papers
2012-03, School of Economics, Shandong University.
- Chenhang Zeng, 2013. "Optimal Advance Selling Strategy under Price Commitment," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 233-258, 05.
- Oksana Loginova, 2013. "Pricing Strategies in Advance Selling: Should a Retailer Offer Pre-order Price Guarantee?," Working Papers 1303, Department of Economics, University of Missouri.
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