Optimal Advance Selling Strategy under Price Commitment

Abstract

Abstract This paper studies a two‐period model of advance selling with experienced and inexperienced consumers. It concludes that advance selling weakly dominates no advance selling, and the optimal advance selling price may be at a discount, at a premium or at the regular selling price. Conditions for each possible advance selling strategy to prevail are characterized. However, without experienced consumers in the market, there are no incentives for the retailer to implement an advance selling price premium. How the consumer composition affects the retailer's optimal pricing strategy and profit is also examined.

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