Advance selling programs: When to introduce and what to inform consumers

Abstract

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.

Advance selling of fresh produce e‐tailer with uncertain demand and risk‐averse consumers

“…The other branch of literature relevant to this study is about advance selling strategy. Scholars have studied the advance selling strategies for nonperishable products such as consumer electronics, fashion apparel, and electric vehicles (Ding & Zhang, 2021; Gupta & Chutani, 2020; Huang et al, 2017; Li & Li, 2023; Ma et al, 2019; Peng & Tian, 2022; Wei & Zhang, 2018; Wu et al, 2021; Xiao et al, 2019; Zeng, 2018). Some scholars explore the effect of consumer behaviors on the strategy of advance selling (Cheng et al, 2022; Glazer et al, 2023; Jia et al, 2022; Şeref et al, 2016; Wei & Zhang, 2018; Zhang et al, 2018; Zhang & He, 2020; Zhang & Yang, 2021; Zhang, Lim, et al, 2021).…”