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Pre-order strategies with demand uncertainty and consumer heterogeneity

Author

Listed:
  • Junshan Lin

    (Jinan Branch, People’s Bank of China)

  • Chenhang Zeng

    (Zhongnan University of Economics and Law)

Abstract

We study pre-order strategies in a two-period, continuous-valuation model with the presence of both demand uncertainty and consumer heterogeneity. Consumers face different levels of uncertainty about their valuations in the pre-order stage: experienced consumers know their individual valuations while inexperienced consumers only know the distribution of their valuations. We find that in the pre-order stage the profit-maximizing retailer may target either all inexperienced consumers with a deep pre-order discount, or experienced consumers with a moderate pre-order discount or a pre-order premium. Furthermore, in an extended model where the retail price is endogenously determined, the retailer’s pricing structure mirrors that of the benchmark model.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:jecrev:v:74:y:2023:i:1:d:10.1007_s42973-021-00072-0
    DOI: 10.1007/s42973-021-00072-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Pre-order strategies; Advance selling; Demand uncertainty; Experienced consumers; Endogenous retail price;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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