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The effects of an undisclosed regular price and a positive leadtime in a presale mechanism

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  • Mei, Wanxia
  • Du, Li
  • Niu, Baozhuang
  • Wang, Jincheng
  • Feng, Jiejian

Abstract

A presale program is popular with manufacturers who wish to reduce the risk posed by uncertain demands. We introduce a new price mechanism in which the manufacturer during the presale period does not disclose the exact regular price in the sale period although it is guaranteed to customers to be higher than the presale price. As positive leadtime is much overlooked in presale models, we analyze the rationality of including one. The numerical results in this paper show that both the specific price mechanism and the positive leadtime have significant effects on the manufacturer’s policy (production quantity, presale price, regular price), the expected profit, and customer behaviors. The optimal discount rate should be greater than 50 percent. This conclusion is consistent with existing results of surveys on saturation points. The manufacturer can take advantage of the latest information on demand gathered in the presale period to update their policy and increase their expected profit.

Suggested Citation

  • Mei, Wanxia & Du, Li & Niu, Baozhuang & Wang, Jincheng & Feng, Jiejian, 2016. "The effects of an undisclosed regular price and a positive leadtime in a presale mechanism," European Journal of Operational Research, Elsevier, vol. 250(3), pages 1013-1025.
    • Handle: RePEc:eee:ejores:v:250:y:2016:i:3:p:1013-1025
    DOI: 10.1016/j.ejor.2015.10.033
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    4. He, Bo & Gan, Xianghua & Yuan, Kaifu, 2019. "Entry of online presale of fresh produce: A competitive analysis," European Journal of Operational Research, Elsevier, vol. 272(1), pages 339-351.

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