This article considers advance selling problems. It explains why some goods (e.g. airline tickets) are sold cheap to early buyers, while others (e.g. theatre tickets) offer discounts to those who buy late. We derive the profit maximising selling strategy for a monopolist when aggregate demand is certain but buyers face uncertainty about their individual demands. When aggregate demand exceeds capacity, both Advance Purchase Discounts as well as Clearance Sales might be optimal. We determine how the comparison of these price discrimination strategies depends on the rationing rule, capacity costs and the availability of temporal capacity limits, price commitment and resale.In this article we consider products that can be purchased in advance, i.e. long before their actual date of consumption. Common examples are airline travel, theatre tickets, the right to participate in conferences or sports events and seasonal products like the newest skiing equipment. In these examples consumers face a trade-off between buying early and buying late. By delaying their purchase consumers may get a better picture about their personal fit with the product but increase their risk to become rationed. This trade-off influences the way in which prices change over time.To see this consider the extreme case where consumers face individual demand uncertainty but rationing risks are negligible. For example, potential participants of a conference or sports event are typically uncertain about their ability to attend but the maximum number of participants might be unlikely to be reached. In this case it is clear that consumers prefer to buy late rather than early since buying late maximises their available information. A profit maximising monopolist can therefore charge an information premium to those consumers that buy late and prices will increase over time. Hence those products for which consumers face individual demand uncertainty but rationing risks are absent will offer Advance Purchase Discounts. Now consider the opposite case where consumers are certain about their personal fit with the product but face a positive risk of becoming rationed. For example, consumers typically know their valuation of a new pair of skis but skis may not be available at the end of the season. In this case consumers prefer to buy early rather than late since buying early minimises their risk of becoming rationed. As a consequence, a profit maximising seller may charge a supply security premium to those consumers who buy early and prices will decrease over time. Hence those products for which individual demand uncertainty is absent but rationing risks exist will be sold by use of a Clearance Sale. participants at various seminars and conferences for valuable discussions and suggestions. We are especially grateful to David Myatt and two anonymous referees for their insightful comments. The authors acknowledge support from the Spanish government research grants SEJ 2006-11665-C02 and ECO 2008-02738-ECON. An earlier version of this article circulated under the ti...

When several contests compete for the participation of a common set of players, a contest's allocation of prizes not only induces incentive effects but also participation effects. Our model predicts that an increase in the sensitivity with which contest outcomes depend on players' efforts makes flatter prize structures more attractive to participants. In equilibrium, contests that aim to maximize the number of participants will award multiple prizes if and only if this sensitivity is sufficiently high. Moreover, the prize awarded to the winner is decreasing in the contests' sensitivity. We provide empirical evidence from professional road running using race-distance as a measure of sensitivity. We show that steeper prize structures are more attractive to top-ranked runners in longer, that is, less sensitive, races. In line with our theory, longer races do in fact offer steeper prize structures. Copyright (c) 2009, RAND.

This paper sheds light on an empirical controversy about the effect of competition on price discrimination. We propose a model in which consumers learn their preferences over time and show that firms offer advance purchase discounts. Consumers choose between an early (uninformed) purchase at a low price and a late (informed) purchase at a high price. Competing firms offer higher discounts to secure a large market share in advance. Competition decreases welfare and may affect consumers negatively. The empirical finding, that competition may influence price dispersion positively or negatively, can be explained by differences in the level of demand uncertainty.

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We show that when leaders share some of their information with subordinates, decision making is subject to a motivational bias; leaders make the decisions their subordinates want to see. As this bias increases with the quality of the shared information, an improvement of an organization's information might even decrease its efficiency. As a consequence, information sharing is not always optimal. We show however that self-confidence can help the leader to overcome his motivational bias, thus making information sharing more attractive. Conversely, we find that information sharing can help to curb the autocratic tendencies of a self-confident leadership. We conclude that a policy of information sharing and the appointment of a self-confident leadership are most effective when they go hand in hand. (1997, p. 193) states that "no matter how brilliant the strategy may be, We thank Ottaviani and participants at various seminars and conferences for valuable suggestions. We are especially grateful to Michele Piccione and Andrea Prat for their guidance and support.

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Do the contests with the largest prizes attract the most able contestants? To what extent do contestants avoid competition? In this paper, we show, theoretically and empirically, that the distribution of abilities plays a crucial role in determining contest choice. Sorting exists only when the proportion of high-ability contestants is sufficiently small. As this proportion increases, contestants shy away from competition and sorting decreases, such that, reverse sorting becomes a possibility. We test our theoretical predictions using a large panel data set containing contest choice over three decades. We use exogenous variation in the participation of highly-able competitors to provide empirical evidence for the relationship among prizes, competition, and sorting.JEL classification: D82, M52, D02