Advance Selling in the Presence of Experienced 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 theoretical 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 or may not be at a discount to the regular selling price.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of Missouri in its series Working Papers with number 1108.
Date of creation: 30 Jun 2011
Date of revision:
advance selling; the Newsvendor Problem; demand uncertainty; experienced consumers; inexperienced consumers.;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-01 (All new papers)
- NEP-BEC-2011-10-01 (Business Economics)
- NEP-COM-2011-10-01 (Industrial Competition)
- NEP-MKT-2011-10-01 (Marketing)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Stratton).
If references are entirely missing, you can add them using this form.