Pre-order strategies with demand uncertainty and consumer heterogeneity

Junshan Lin and Chenhang Zeng
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Junshan Lin: Jinan Branch, People’s Bank of China

The Japanese Economic Review, 2023, vol. 74, issue 1, No 4, 83-115

Abstract: Abstract We study pre-order strategies in a two-period, continuous-valuation model with the presence of both demand uncertainty and consumer heterogeneity. Consumers face different levels of uncertainty about their valuations in the pre-order stage: experienced consumers know their individual valuations while inexperienced consumers only know the distribution of their valuations. We find that in the pre-order stage the profit-maximizing retailer may target either all inexperienced consumers with a deep pre-order discount, or experienced consumers with a moderate pre-order discount or a pre-order premium. Furthermore, in an extended model where the retail price is endogenously determined, the retailer’s pricing structure mirrors that of the benchmark model.

Keywords: Pre-order strategies; Advance selling; Demand uncertainty; Experienced consumers; Endogenous retail price (search for similar items in EconPapers)
JEL-codes: D42 L12 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s42973-021-00072-0

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