Advance-selling as a competitive marketing tool. Advance-selling as a Competitive Marketing Tool 22(3

Abstract

Abstract Advance selling before the time of consumption, and other creative pricing strategies, are now possible, for even very small service providers, given new technologies (specifically, web-based transactions, biometrics and smart card technology). Moreover, recent research has revealed that advance selling can substantially improve profits without traditional price-discrimination. However, that research was limited to monopoly settings. This paper explores the impact of competition on advance selling and produces four major findings. First, advance selling can be advantageous for sellers with competitors. Second, the existence of competitors can limit the situations (i.e., more restrictive parametric conditions) when advance selling is more advantageous . Third, given these restrictive conditions are met; advance selling can be more advantageous to the seller with competitors than a monopolist because advance selling diminishes price competition. Fourth, advance selling can create a win-win-win situation where the profits of two competitors increase while consumer surplus increases because advance selling allows greater market participation. Hence, advance selling can be a very effective marketing tool in a competitive setting (albeit given more restrictive conditions). It is a tool that can diminish competition while increasing buyer surplus