IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v41y2020i3p308-320.html
   My bibliography  Save this article

Optimal advance selling discount strategy with future‐oriented consumers

Author

Listed:
  • Wen Zhang
  • Yi He

Abstract

This paper examines the advance selling decisions over two periods and considers future‐oriented consumers who are more concerned about the product quality than price discounts. We find that the advance selling strategy is not always best, and its merits are contingent on parameters of the market and consumers. Moreover, there is no need to set a deep advance selling discount for the retailer if consumers are highly risk averse. Next, we analyze the feasible advance selling pricing strategies for the retailer. Finally, we observe that the retailer can announce a higher advance selling price if consumers are moderately risk averse.

Suggested Citation

  • Wen Zhang & Yi He, 2020. "Optimal advance selling discount strategy with future‐oriented consumers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(3), pages 308-320, April.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:3:p:308-320
    DOI: 10.1002/mde.3101
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3101
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3101?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Franziska Völckner & Julian Hofmann, 2007. "The price-perceived quality relationship: A meta-analytic review and assessment of its determinants," Marketing Letters, Springer, vol. 18(3), pages 181-196, September.
    2. Sucharita Chandran & Vicki G. Morwitz, 2006. "The Price of "Free"-dom: Consumer Sensitivity to Promotions with Negative Contextual Influences," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 33(3), pages 384-392, October.
    3. Fishburn, Peter C, 1977. "Mean-Risk Analysis with Risk Associated with Below-Target Returns," American Economic Review, American Economic Association, vol. 67(2), pages 116-126, March.
    4. Oksana Loginova & X. Henry Wang & Chenhang Zeng, 2017. "Learning in Advance Selling with Heterogeneous Consumers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(6), pages 765-783, September.
    5. Ding, Min & Ross, William T. & Rao, Vithala R., 2010. "Price as an Indicator of Quality: Implications for Utility and Demand Functions," Journal of Retailing, Elsevier, vol. 86(1), pages 69-84.
    6. Javad Nasiry & Ioana Popescu, 2012. "Advance Selling When Consumers Regret," Management Science, INFORMS, vol. 58(6), pages 1160-1177, June.
    7. Christopher S. Tang & Kumar Rajaram & Ayd{i}n Alptekinou{g}lu & Jihong Ou, 2004. "The Benefits of Advance Booking Discount Programs: Model and Analysis," Management Science, INFORMS, vol. 50(4), pages 465-478, April.
    8. Huang, Kwei-Long & Kuo, Chia-Wei & Shih, Han-Ju, 2017. "Advance selling with freebies and limited production capacity," Omega, Elsevier, vol. 73(C), pages 18-28.
    9. Fei Gao & Jian Chen, 2015. "The Role of Discount Vouchers in Market with Customer Valuation Uncertainty," Production and Operations Management, Production and Operations Management Society, vol. 24(4), pages 665-679, April.
    10. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    11. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 239-292, September.
    12. Wu, Jun & Li, Jian & Wang, Shouyang & Cheng, T.C.E., 2009. "Mean-variance analysis of the newsvendor model with stockout cost," Omega, Elsevier, vol. 37(3), pages 724-730, June.
    13. Chenhang Zeng, 2013. "Optimal Advance Selling Strategy under Price Commitment," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 233-258, May.
    14. Mukherjee, Amaradri & Jha, Subhash & Smith, Ronn J., 2017. "Regular Price $299; Pre-order Price $199: Price Promotion for a Pre-ordered Product and the Moderating Role of Temporal Orientation," Journal of Retailing, Elsevier, vol. 93(2), pages 201-211.
    15. Kuthambalayan, Thyagaraj S. & Mehta, Peeyush & Shanker, Kripa, 2015. "Managing product variety with advance selling and capacity restrictions," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 287-296.
    16. Yu, Yugang & Liu, Jie & Han, Xiaoya & Chen, Can, 2017. "Optimal decisions for sellers considering valuation bias and strategic consumer reactions," European Journal of Operational Research, Elsevier, vol. 259(2), pages 599-613.
    17. Xuying Zhao & Zhan Pang & Kathryn E. Stecke, 2016. "When Does a Retailer's Advance Selling Capability Benefit Manufacturer, Retailer, or Both?," Production and Operations Management, Production and Operations Management Society, vol. 25(6), pages 1073-1087, June.
    18. Man Yu & Roman Kapuscinski & Hyun-Soo Ahn, 2015. "Advance Selling: Effects of Interdependent Consumer Valuations and Seller’s Capacity," Management Science, INFORMS, vol. 61(9), pages 2100-2117, September.
    19. Georgiadis, George & Tang, Christopher S., 2014. "Optimal reservation policies and market segmentation," International Journal of Production Economics, Elsevier, vol. 154(C), pages 81-99.
    20. Krishnan, Balaji C. & Dutta, Sujay & Jha, Subhash, 2013. "Effectiveness of Exaggerated Advertised Reference Prices: The Role of Decision Time Pressure," Journal of Retailing, Elsevier, vol. 89(1), pages 105-113.
    21. Mike Mingcheng Wei & Fuqiang Zhang, 2018. "Advance Selling to Strategic Consumers: Preorder Contingent Production Strategy with Advance Selling Target," Production and Operations Management, Production and Operations Management Society, vol. 27(7), pages 1221-1235, July.
    22. Anthony D. Miyazaki & Dhruv Grewal & Ronald C. Goodstein, 2005. "The Effect of Multiple Extrinsic Cues on Quality Perceptions: A Matter of Consistency," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 32(1), pages 146-153, June.
    23. Xuanming Su & Fuqiang Zhang, 2009. "On the Value of Commitment and Availability Guarantees When Selling to Strategic Consumers," Management Science, INFORMS, vol. 55(5), pages 713-726, May.
    24. Bellantuono, Nicola & Giannoccaro, Ilaria & Pontrandolfo, Pierpaolo & Tang, Christopher S., 2009. "The implications of joint adoption of revenue sharing and advance booking discount programs," International Journal of Production Economics, Elsevier, vol. 121(2), pages 383-394, October.
    25. Jinhong Xie & Steven M. Shugan, 2001. "Electronic Tickets, Smart Cards, and Online Prepayments: When and How to Advance Sell," Marketing Science, INFORMS, vol. 20(3), pages 219-243, June.
    26. Xuanming Su & Fuqiang Zhang, 2008. "Strategic Customer Behavior, Commitment, and Supply Chain Performance," Management Science, INFORMS, vol. 54(10), pages 1759-1773, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Junbin Wang, 2022. "In‐store service decisions under consumer disappointment aversion," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 681-695, April.
    2. Eui-Bang Lee & Heon Baek, 2024. "Prediction of Information Diffusion of New Products: Based on Product Launch and Media Difference," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 6802-6831, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wen Zhang & Weizhe Yang, 2021. "Optimal pre-order strategy with delay in payments," Annals of Operations Research, Springer, vol. 305(1), pages 347-374, October.
    2. Qinhong Zhang & Xinyue Cheng & Yu-Chung Tsao & Dali Zhang, 2022. "Advance selling under deposit expansion and consumer’s valuation change," Operational Research, Springer, vol. 22(4), pages 3633-3661, September.
    3. Zhan Pang & Wenqiang Xiao & Xuying Zhao, 2021. "Preorder Price Guarantee in e-Commerce," Manufacturing & Service Operations Management, INFORMS, vol. 23(1), pages 123-138, 1-2.
    4. Mukherjee, Amaradri & Jha, Subhash & Smith, Ronn J., 2017. "Regular Price $299; Pre-order Price $199: Price Promotion for a Pre-ordered Product and the Moderating Role of Temporal Orientation," Journal of Retailing, Elsevier, vol. 93(2), pages 201-211.
    5. Man Yu & Hyun-Soo Ahn & Roman Kapuscinski, 2015. "Rationing Capacity in Advance Selling to Signal Quality," Management Science, INFORMS, vol. 61(3), pages 560-577, March.
    6. Oksana Loginova, 2021. "Advance selling, competition, and brand substitutability," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1765-1781, October.
    7. Roberta Pellegrino & Nicola Costantino & Danilo Tauro, 2020. "Advance Purchase Discounts for Supply Chain Finance System Coordination," Sustainability, MDPI, vol. 12(23), pages 1-20, December.
    8. Cuihong Li & Fuqiang Zhang, 2013. "Advance Demand Information, Price Discrimination, and Preorder Strategies," Manufacturing & Service Operations Management, INFORMS, vol. 15(1), pages 57-71, September.
    9. Junshan Lin & Chenhang Zeng, 2023. "Pre-order strategies with demand uncertainty and consumer heterogeneity," The Japanese Economic Review, Springer, vol. 74(1), pages 83-115, January.
    10. Yawen Zhang & Bo Li & Xue Chen & Shuang Wu, 2020. "Online advance selling or not: Pricing strategy of new product entry in a supply chain," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1446-1461, December.
    11. Ma, Shanshan & Li, Guo & Sethi, Suresh P. & Zhao, Xuan, 2022. "Advance booking discount strategies: Competition, information transparency and spot market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    12. Wu, Meng & Teunter, Ruud H. & Zhu, Stuart X., 2019. "Online marketing: When to offer a refund for advanced sales," International Journal of Research in Marketing, Elsevier, vol. 36(3), pages 471-491.
    13. Shi, Xiutian & Dong, Ciwei & Cheng, T.C.E., 2018. "Does the buy-online-and-pick-up-in-store strategy with pre-orders benefit a retailer with the consideration of returns?," International Journal of Production Economics, Elsevier, vol. 206(C), pages 134-145.
    14. Jaelynn Oh & Xuanming Su, 2022. "Optimal Pricing and Overbooking of Reservations," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 928-940, March.
    15. Ye, Taofeng & Yang, Huiqiang, 2020. "Price and Quality Management with Strategic Consumers: Whether to Introduce a High or Low Product Variant," Applied Mathematics and Computation, Elsevier, vol. 386(C).
    16. Huang, Kwei-Long & Kuo, Chia-Wei & Shih, Han-Ju, 2017. "Advance selling with freebies and limited production capacity," Omega, Elsevier, vol. 73(C), pages 18-28.
    17. Xiao, Yongbo & Zhang, Jihong, 2018. "Preselling to a retailer with cash flow shortage on the manufacturer," Omega, Elsevier, vol. 80(C), pages 43-57.
    18. Chenhang Zeng, 2020. "Advance selling of new products considering retailers’ learning," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(3), pages 306-328, September.
    19. Chenhang Zeng, 2013. "Optimal Advance Selling Strategy under Price Commitment," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 233-258, May.
    20. Enrico Diecidue & Nils Rudi & Wenjie Tang, 2012. "Dynamic Purchase Decisions Under Regret: Price and Availability," Decision Analysis, INFORMS, vol. 9(1), pages 22-30, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:41:y:2020:i:3:p:308-320. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.