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Mitigating the Adverse Impact of Strategic Waiting in Dynamic Pricing Settings: A Study of Two Sales Mechanisms

In: Consumer-Driven Demand and Operations Management Models

Author

Listed:
  • Yossi Aviv

    (Washington University in St. Louis)

  • Christopher S. Tang

    (University of California)

  • Rui Yin

    (Arizona State University)

Abstract

As post-season clearance sales become more prevalent, more customers postpone their purchases and wait for the clearance price. This form of strategic waiting can reduce retailers’ revenue. As a way to mitigate the negative effect of strategic waiting, we analyze two sales mechanisms in this chapter. The first sales mechanism deals with the way inventory information is conveyed to customers. Specifically, we consider two types of inventory display formats under which the retailer can either display all (DA) available units to the customers or display one (DO) unit at a time so that customers have perfect (imperfect) information about the actual inventory level under the DA (DO) display format. The second sales mechanism involves an additional purchasing option that allows each customer to make a “non-withdrawable reservation.” Specifically, if a customer reserves an item during the season and the reserved item remains unsold at the end of the season, then this customer is obligated to purchase the reserved item at the clearance price. In this chapter, we analyze the implications of these two sales mechanisms on the customers’ strategic purchasing behavior, the retailer’s optimal pricing and ordering decisions, and the retailer’s expected profit.

Suggested Citation

  • Yossi Aviv & Christopher S. Tang & Rui Yin, 2009. "Mitigating the Adverse Impact of Strategic Waiting in Dynamic Pricing Settings: A Study of Two Sales Mechanisms," 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 353-370, Springer.
    • Handle: RePEc:spr:isochp:978-0-387-98026-3_13
    DOI: 10.1007/978-0-387-98026-3_13
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    Cited by:

    1. 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.
    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.

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