Advance selling to strategic consumers

Şeref, Michelle M. H.; Şeref, Onur; Alptekinoğlu, Aydın; Erengüç, Ş. Selçuk

doi:10.1007/s10287-016-0264-3

Cited by 10 publications

(11 citation statements)

References 15 publications

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“…In other words, the seller needs to offer discounted advance selling. [22] and [27] find that both premium and discounted advance selling are possible. For instance, [27] prove that premium (discounted) advance selling is optimal when the seller's capacity is large (small).…”

Section: Advance Periodmentioning

confidence: 99%

“…For the case of interdependent customer valuations, [29] show that the seller's decisions on whether to offer advance selling, including full or limited advance selling, are dependent on both the seller's capacity and the marginal cost. Moreover, [22] develop a model to simultaneously analyze the seller's optimal inventory management, capacity rationing in the advance period, and pricing policies. In the above three studies, the product quality is assumed to be exogenous; whereas in the current research, our focus is on the interaction between the decisions on quality choice and capacity rationing.…”

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confidence: 99%

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Quality choice and capacity rationing in advance selling

Ye¹,

Yan²

2021

JIMO

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This study considers a seller who sells a single product to strategic consumers sensitive to both price and quality over two periods: advance and spot. Customers' valuations are uncertain in the first period and revealed over time. The seller's decisions include whether to offer the product and, if so, the quality of the product, the prices in both periods, and whether to ration capacity in the advance period. The analysis is separated into two cases: unlimited capacity and limited capacity. The first case acts as a benchmark for the latter. It is found that in each case, the seller's decisions on product offering and quality choice are fully determined by a single parameter, namely the cost coefficient of quality. The optimal rationing policy and its determinants, however, are distinct in these different settings. And the optimal rationing policy is contingent on whether the high-or low-quality product is offered. Further, our numerical studies show that the seller can benefit from capacity rationing and flexibility on quality choice. Specifically, the value of rationing is not evident, whereas the value of flexibility on quality choice is considerably significant.

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Section: Advance Periodmentioning

confidence: 99%

mentioning

confidence: 99%

Quality choice and capacity rationing in advance selling

Ye¹,

Yan²

2021

JIMO

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“…Therefore, the literature mostly considers the strategic behavior of consumers and how that affects decisions. For example, Şeref, Alptekinoğlu and Erengüç (2016) consider the advance selling problem with strategic consumers. Lee, Choi and Cheng (2015) further consider the advance selling problem when strategic consumers are loss averse.…”

Section: Literature Reviewmentioning

confidence: 99%

Advance Selling and Advertising: A Newsvendor Framework

Zhu

Teunter

2020

Decision Sciences

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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.

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“…Regarding research on pricing and ordering decision under the pre-sale mode, Seref et al [27] studied the expected effect of consumers comparing pre-orders and deferring to the spot period to make decisions to select the most favorable timing for purchases and how retailers can develop optimal pre-sale prices and purchase quantities based on consumer strategic behavior. Xu et al [28] constructed a one-order model and a two-order model with initial stock shortages.…”

Section: Literature On Pricing and Ordering Decision Under Non-omnichmentioning

confidence: 99%

Joint Decision on Pricing and Ordering for Omnichannel BOPS Retailers: Considering Online Returns

Liu

2020

Sustainability

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Uncertainty in demand and high online return rates tend to generate a large inventory backlog after a hot selling season. Some well-known companies such as Burberry and H&M choose to burn these backlogs, which is very unfavorable to the sustainable development of enterprises and society. The omnichannel BOPS (Buy Online and Pickup in Store) provides consumers with a new and convenient choice of purchasing channels. Considering the probability of online return, we build expected profit models for retailers before and after opening a BOPS channel based on consumer surplus and purchase ratio via an online channel, store channel, and BOPS channel. Then, we prove the existence of optimal solutions and obtain the joint optimization decision on pricing and ordering. The results show that, under certain conditions, when the proportion of online channel buyers increases, the retailers' optimal decision before opening a BOPS channel is to reduce the price and increase the order quantity, and the retailers' optimal decision after opening a BOPS channel is to simultaneously reduce the price and the order quantity. Whether or not a BOPS channel is opened, when the purchase proportion of store channel increases, the optimal decision of retailers is to increase the price and order quantity at the same time. Furthermore, when the online return rate, the cost of online shopping, the inconvenient cost of the store channel, and the inconvenience of the BOPS channel relative to store channel increase, the optimal decision of retailers is to simultaneously reduce the price and order quantity. Moreover, when the maximum psychological value of the product increases, the optimal decision is to reduce the order quantity while increasing the price. In addition, the opening of a BOPS channel increases optimal price, optimal order quantity, and maximum expected profit.

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Advance selling to strategic consumers

Cited by 10 publications

References 15 publications

Quality choice and capacity rationing in advance selling

Quality choice and capacity rationing in advance selling

Advance Selling and Advertising: A Newsvendor Framework

Joint Decision on Pricing and Ordering for Omnichannel BOPS Retailers: Considering Online Returns

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