Learning in Advance Selling with Heterogeneous Consumers
The 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, while inexperienced consumers learn their valuations only in the regular selling season. 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.
|Date of creation:||14 Apr 2014|
|Note:||Substantially revised from WP1213|
|Contact details of provider:|| Postal: 118 Professional Building, Columbia, MO 65211|
Phone: (573) 882-0063
Fax: (573) 882-2697
Web page: http://economics.missouri.edu/
More information through EDIRC
References listed on IDEAS
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.:
- Nocke, Volker & Peitz, Martin, 2008.
"Advance-Purchase Discounts as a Price Discrimination Device,"
CEPR Discussion Papers
6664, C.E.P.R. Discussion Papers.
- 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.
- Courty, Pascal, 2002.
"Ticket Pricing Under Demand Uncertainty,"
CEPR Discussion Papers
3443, C.E.P.R. Discussion Papers.
- 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.
- 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.
- James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
- Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 355-371.
- Cuihong Li & Fuqiang Zhang, 2013. "Advance Demand Information, Price Discrimination, and Preorder Strategies," Manufacturing & Service Operations Management, INFORMS, vol. 15(1), pages 57-71, September.
When requesting a correction, please mention this item's handle: RePEc:umc:wpaper:1408. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valerie Kulp)
If references are entirely missing, you can add them using this form.