Optimal Advance Selling Strategy under Price Commitment
This paper considers a two-period model with experienced consumers and inexperienced consumers. The retailer determines both advance selling price and regular selling price at the beginning of the first period. I show that advance selling weekly dominates no advance selling, and the optimal advance selling price may be at a discount, at a premium or at the regular selling price. To help the retailer choose the optimal pricing strategy, conditions for each possible advance selling strategy to outperform others are characterized. Furthermore, how the consumer composition affects the retailer¡¯s optimal pricing strategy and profit are examined. In the extension, a special case with no experienced consumers provides a new explanation of advance selling price premium. That is, without experienced consumers, there are no incentives for the retailer to implement advance selling at a premium price. Besides, another special case indicates that advance selling strictly dominates no advance selling when consumer valuation distribution is uncertain. With pre-order information obtained in the first period under advance selling, the retailer is able to know the consumer valuation distribution and thus better forecast the future demand.
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.:
- repec:umc:wpaper:1213 is not listed on IDEAS
- Oksana Loginova & X. Henry Wang & Chenhang Zeng, 2012.
"Learning in Advance Selling with Heterogeneous Consumers,"
12-08, NET Institute, revised Sep 2012.
- 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.
- Oksana Loginova & X. Hnery Wang & Chenhang Zeng, 2014. "Learning in Advance Selling with Heterogeneous Consumers," Working Papers 1408, Department of Economics, University of Missouri.
- Nocke, Volker & Peitz, Martin & Rosar, Frank, 2011. "Advance-purchase discounts as a price discrimination device," Journal of Economic Theory, Elsevier, vol. 146(1), pages 141-162, January.
- Nocke, Volker & Peitz, Martin, 2008. "Advance-Purchase Discounts as a Price Discrimination Device," CEPR Discussion Papers 6664, C.E.P.R. Discussion Papers.
- Hairong Chen & Mahmut Parlar, 2005. "Dynamic analysis of the Newsboy model with early purchase commitments," International Journal of Services and Operations Management, Inderscience Enterprises Ltd, vol. 1(1), pages 56-74.
- Oksana Loginova & X. Hnery Wang & Chenhang Zeng, 2011. "Advance Selling in the Presence of Experienced Consumers," Working Papers 1108, Department of Economics, University of Missouri.
- Jinhong Xie & Steven M. Shugan, 2001. "Electronic Tickets, Smart Cards, and Online Prepayments: When and How to Advance Sell," Marketing Science, INFORMS, vol. 20(3), pages 219-243, June. Full references (including those not matched with items on IDEAS)