Advance Selling in the Presence of Experienced 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 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.advance selling, the Newsvendor Problem, demand uncertainty, experienced consumers, inexperienced consumers.

Advance Selling with Speculators

近年来随着科技日新月异的进步发展，消费者的需求表现出日益多样化的趋势。厂商必须不断发布新产品来迎合市场的需要。但是新产品的需求往往具有很大的不确定性。 而产品预售可以揭示未来市场需求，降低库存水平。因此预售作为一种重要的营销手段，越来越受到厂商的重视。但是在互联网时代下，消费者获取信息的能力大幅加强，进行购买决策时表现出更强的策略性。另一方面，网络极大地减少了二手商品的交易成本，投机者得以更加便利地转售商品。这都增加了厂商预售的难度。基于以上现实，本文建立了一个由垄断厂商、消费者和投机者组成的市场模型。该厂商分预售期和销售期两个阶段向市场销售商品。通过分析三者的博弈均衡来寻找厂商的最优预售策...With science and technology changing rapidly in recent years, the demands of consumers are inclined to gain more diversity with each passing day. The manufacturers must release new products to cater to the need of the market. However, the need of new products often tends to be inconclusive. So the manufacturers began to pay more and more attention to the advance selling,which as an important marke...学位：管理学硕士院系专业：管理学院_管理科学与工程学号：1772013115109

Is Advance Selling Desirable with Competition?

It has been shown that a monopolist can use advance selling to increase profits. This paper documents that this may not hold when a firm faces competition. With advance selling a firm offers its service in an advance period, before consumers know their valuations for the firms’ services, or later on in a spot period, when consumers know their valuations. We identify two ways in which competition limits the effectiveness of advance selling. First, while a monopolist can sell to consumers with homogeneous preferences at a high price, this homogeneity intensifies price competition, which lowers profits. However, the firms may nevertheless find themselves in an equilibrium with advance selling. In this sense, advance selling is better described as a competitive necessity rather than as an advantageous tool to raise profits. Second, competition in the spot period is likely to lower spot period prices, thereby forcing firms to lower advance period prices, which is also not favorable to profits. Rational firms anticipate this and curtail or eliminate the use of advance selling. Thus, even though a monopolist fully exploits the practice of advance selling, rational firms facing competition either mitigate it or avoid it completely

Essays on advance selling of new to-be-released products

Title from PDF of title page (University of Missouri--Columbia, viewed on August 30, 2012).The entire thesis text is included in the research.pdf file; the official abstract appears in the short.pdf file; a non-technical public abstract appears in the public.pdf file.Dissertation advisors: Dr. Oksana Loginova and Dr. Xinghe WangIncludes bibliographical references.Vita.Ph. D. University of Missouri--Columbia 2012."May 2012"This dissertation comprises three essays on the same topic: advance selling of new to-be-released products. The first essay studies the retailer's optimal strategy in a model where the demand uncertainty comes from both the market size and the distribution of consumers' valuations. I find that there are three types of advance selling strategies: advance selling at a deep discount, advance selling at a moderate discount and no advance selling. I also characterize the conditions under which the retailer adopts advance selling and perform comparative statics analysis. The second essay studies the retailer's optimal advance selling strategy in a model with the presence of experienced consumers. We divide consumers into two groups, experienced and inexperienced. 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. The third essay investigates advance selling at a price premium. I show that advance selling at a price premium always yields more profit for the retailer compared with advance selling at the regular selling price. In addition, I analyze conditions under which the retailer is more likely to implement advance selling at a price premium instead of a price discount. Sensitivity analysis is also presented to show how the retailer's optimal advance selling price premium and optimal total profit are affected by some important parameters in the model.Includes bibliographical reference

Online marketing:When to offer a refund for advanced sales

Advance selling is a marketing strategy commonly used by online retailers to increase sales by exploiting consumer valuation uncertainty. Recently, some online retailers have started to allow refunds on products sold in advance. On the one hand this reduces the net advance sales, but on the other hand it allows a higher advance sales price. This research is the first to explore the overall effect of allowing a refund on profits from advance sales, identifying conditions where advance selling with or without refunds (or no advance selling at all) is best. We analytically compare the profits of three advance selling strategies: none, without refund, and with refund. We show that selling in advance and allowing a refund is optimal for products with a relatively small profit margin and small strategic market size, and that the added profit can be considerable. Our results guide managers in selecting the right advance selling strategy. To facilitate this, we graphically display, based on the two dimensions of regular profit margin and strategic market size, under what conditions the different strategies are optimal

Advance Selling and Advertising:A Newsvendor Framework

Many firms offer consumers the opportunity to place advance orders at a discount when introducing a new product to the market. Doing so has two main advantages. First, it can increase total expected sales by exploiting valuation uncertainty of the consumers at the advance ordering stage. Second, total sales can be estimated more accurately based on the observed advance orders, reducing the need for safety stock and thereby obsolescence cost. In this research, we derive new insights into trading off these benefits against the loss in revenue from selling at a discount at the advance stage. In particular, we are the first to explore whether firms should advertise the advance ordering opportunity. We obtain several structural insights into the optimal policy, which we show is driven by two dimensions: the fraction of consumers who potentially buy in advance (i.e., strategic consumers) and the size of the discount needed to make them buy in advance. If the discount is below some threshold, then firms should sell in advance and they should advertise that option if the fraction of strategic consumers is sufficiently large. If the discount is above the threshold, then firms should not advertise and only sell in advance if the fraction of strategic consumers is sufficiently small. Graphical displays based on the two dimensions provide further insights

Rationing Capacity in Advance Selling to Signal Quality

We consider a seller who can sell her product over two periods, advance and spot. The seller has private information about the product quality, which is unknown to customers in advance and publicly revealed in spot. The question we consider is whether the seller has an incentive to signal quality in advance and, if so, how she can convey a credible signal of product quality. We characterize the seller's signaling strategy and find that rationing of capacity in the advance period is an effective tool of signaling product quality. We find that the high-quality seller can distinguish herself by allocating less capacity than the low-quality seller in the advance period. We show that this signaling mechanism exists whenever advance selling would be optimal for both the high-quality and low-quality sellers if quality information was symmetric. We compare capacity rationing with other signaling tools, such as pricing and advertising, and show that capacity rationing is the preferred one. Despite its capability of conveying quality information more efficiently than other tools, capacity rationing may still be very costly for the seller. When compared to the case when rationing was not allowed, the seller's ability to ration (rationing flexibility) sometimes makes the seller worse off, independently of her quality.http://deepblue.lib.umich.edu/bitstream/2027.42/100188/1/1204_Kapuscinski.pd

Advance selling and service cancelation when consumers are overconfident

Purpose: This paper aims to study the joint decision making of advance selling and service cancelation for service provides with limited capacity when consumers are overconfident. Design/methodology/approach: For the case in which consumers encounter uncertainties about product valuation and consumption states in the advance period and are overconfident about the probability of a good state, we study how the service provider chooses the optimal sales strategy among the non-advance selling strategy, the advance selling and disallowing cancelation strategy, and the advance selling and allowing cancelation strategy. We also discuss how overconfidence influences the service provider’s decision making. Findings: The results show that when service capacity is sufficient, the service provider should adopt advance selling and disallow cancelation; when service capacity is insufficient, the service provider should still implement advance selling but allow cancelation; and when service capacity is extremely insufficient, the service provider should offer spot sales. Moreover, overconfidence weakens the necessity to allow cancelation under sufficient service capacity and enhances it under insufficient service capacity but is always advantageous to advance selling. Practical implications: The obtained results provide managerial insights for service providers to make advance selling decisions. Originality/value: This paper is among the first to explore the effect of consumers’ overconfidence on the joint decision of advance selling and service cancelation under capacity constraints

Advance Selling Programs: When to Introduce and What to Inform Consumers

We study a two-stage model in which the information processed by consumers at the first stage (advance selling stage) is endogenously determined. In the model, the firm decides whether to introduce an advance selling program, chooses what attribute information to disclose and determines an advance selling price and a retail price. Forward-looking consumers strategically choose, based on the disclosed information, to buy in advance or to make a purchase decision at the second stage (retail stage) when all information is revealed. We characterize the firm's optimal choice on the advance selling program and the strategy of information disclosure. In particular, we show that the firm always prefers to introduce the advance selling program except when underlying consumer preferences are extremely homogenous. In addition, we find that fully revealing horizontal product information at the advance selling stage is never optimal to the firm, but revealing either partial or no product information can be optimal depending on the underlying consumer preferences. Our finding that partial information disclosure is sometimes optimal to the firm is in contrast to the result in the literature of horizontal information provision that a firm maximizes profit by revealing either no or full information to consumers