Learning in Advance Selling with Heterogeneous Consumers

Oksana Loginova (), X. Wang () and Chenhang Zeng
Additional contact information
Oksana Loginova: Department of Economics, University of Missouri-Columbia

No 12-08, Working Papers from NET Institute

Abstract: The advance selling strategy is implemented when a firm offers consumers the opportunity to order its product in advance of the regular selling season. Advance selling reduces uncertainty for both the firm and the buyer and enables the firm to update its forecast of future demand. The distinctive feature of the present study of advance selling is that we divide consumers into two groups, experienced and inexperienced. Experienced consumers know their valuations of the product in advance. The presence of experienced consumers yields new insights. Specifically, pre-orders from experienced consumers lead to a more precise forecast of future demand by the firm. We show that the firm will always adopt advance selling and that the optimal pre-order price may be at a discount or a premium relative to the regular selling price.

Keywords: advance selling; the Newsvendor Problem; demand uncertainty; experienced consumers; inexperienced consumers. (search for similar items in EconPapers)
JEL-codes: C72 D42 L12 M31 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012-07, Revised 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Learning in Advance Selling with Heterogeneous Consumers (2017)
Working Paper: Learning in Advance Selling with Heterogeneous Consumers (2014)
Working Paper: Learning in Advance Selling with Heterogeneous Consumers (2012)
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