Advance Selling, Competition, and Brand Substitutability

Oksana Loginova ()

No 1812, Working Papers from Department of Economics, University of Missouri

Abstract: This paper studies the impact of competition on the benefits of advance selling. I construct a two-period price-setting game with two firms that produce different brands serving heterogeneous consumers. Some consumers prefer one brand, others prefer the other brand. Consumers derive common value from their preferred brand, but they differ in how strongly they dislike their less preferred brand. One of the firms can offer consumers the opportunity to pre-order its product in advance of the regular selling season. I calculate the benefits of advance selling when this firm faces competition from the other firm in the regular selling season and when it does not. Competition is shown to enhance the benefits of advance selling when in the advance selling season consumers are uncertain about which brand they will prefer. Comparative statics analysis with respect to brand substitutability reveal some interesting results.

Keywords: advance selling; price competition; strategic consumers; valuation uncertainty; consumer heterogeneity; substitutability of brands (search for similar items in EconPapers)
JEL-codes: C72 D42 D43 L12 L13 M31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2018
New Economics Papers: this item is included in nep-com, nep-gth, nep-ipr, nep-mic and nep-mkt
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Related works:
Journal Article: Advance selling, competition, and brand substitutability (2021)
Working Paper: Advance Selling, Competition, and Brand Substitutability (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1812

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