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Selling to Strategic Customers: Opaque Selling Strategies

In: Consumer-Driven Demand and Operations Management Models

Author

Listed:
  • Kinshuk Jerath

    (Carnegie Mellon University)

  • Serguei Netessine

    (University of Pennsylvania)

  • Senthil K. Veeraraghavan

    (University of Pennsylvania)

Abstract

Over the past few years, firms in the travel and entertainment industries have begun using novel sales strategies for revenue management. In this chapter, we study a selling strategy called opaque selling, in which firms guarantee one of several fully specified products, but hide the identity of the product that the consumer will actually obtain until after the purchase is completed. Several firms such as Hotwire, Priceline, and Mystery Flights engage in opaque selling of travel products. The academic literature in this area is recent and evolving. We first survey the nascent literature on opaque selling strategies. After presenting the current state of theory and practice, we analyze in-depth a model of competing firms selling horizontally differentiated products through an opaque channel. Consumers strategically time their purchases by developing rational expectations about future availability in the opaque market, keeping in mind that demand is uncertain and product supply could be limited. This model helps illustrate the conditions under which opaque selling can increase firm profits. We conclude the chapter by discussing ongoing research and charting out future research directions.

Suggested Citation

  • Kinshuk Jerath & Serguei Netessine & Senthil K. Veeraraghavan, 2009. "Selling to Strategic Customers: Opaque Selling Strategies," International Series in Operations Research & Management Science, in: Christopher S. Tang & Serguei Netessine (ed.), Consumer-Driven Demand and Operations Management Models, edition 1, chapter 0, pages 253-300, Springer.
    • Handle: RePEc:spr:isochp:978-0-387-98026-3_10
    DOI: 10.1007/978-0-387-98026-3_10
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    Citations

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    Cited by:

    1. Mantin, Benny & Gillen, David, 2011. "The hidden information content of price movements," European Journal of Operational Research, Elsevier, vol. 211(2), pages 385-393, June.
    2. Qing Li & Christopher S. Tang & He Xu, 2020. "Mitigating the Double‐Blind Effect in Opaque Selling: Inventory and Information," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 35-54, January.
    3. Lee, Misuk & Khelifa, Alexandre & Garrow, Laurie A. & Bierlaire, Michel & Post, David, 2012. "An analysis of destination choice for opaque airline products using multidimensional binary logit models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(10), pages 1641-1653.
    4. Ying He & Huaxia Rui, 2022. "Probabilistic selling in vertically differentiated markets: The role of substitution," Production and Operations Management, Production and Operations Management Society, vol. 31(11), pages 4191-4204, November.
    5. Ruomeng Cui & Hyoduk Shin, 2018. "Sharing Aggregate Inventory Information with Customers: Strategic Cross-Selling and Shortage Reduction," Management Science, INFORMS, vol. 64(1), pages 381-400, January.
    6. Tingliang Huang & Yimin Yu, 2014. "Sell Probabilistic Goods? A Behavioral Explanation for Opaque Selling," Marketing Science, INFORMS, vol. 33(5), pages 743-759, September.
    7. Tang, Christopher S., 2010. "A review of marketing-operations interface models: From co-existence to coordination and collaboration," International Journal of Production Economics, Elsevier, vol. 125(1), pages 22-40, May.
    8. Yeu-Shiang Huang & Tzu-Yi Wu & Chih-Chiang Fang & Tzu-Liang (Bill) Tseng, 2021. "Decisions on Probabilistic Selling for Consumers with Different Risk Attitudes," Decision Analysis, INFORMS, vol. 18(2), pages 121-138, June.

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