Advance selling programs : when to introduce and what to inform consumers

Yucheng DING*, Tianle ZHANG

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

We study a two-stage model in which the information processed by consumers at the first stage (advance selling stage) is endogenously determined. In the model, the firm decides whether to introduce an advance selling program, chooses what attribute information to disclose, and determines an advance selling price and a retail price. Forward-looking consumers strategically choose, based on the disclosed information, to buy in advance or to make a purchase decision at the second stage (retail stage) when all information is revealed. We characterize the firm's optimal choice on the advance selling program and the strategy of information disclosure. In particular, we show that the firm always prefers to introduce the advance selling program except when underlying consumer preferences are extremely homogenous. In addition, we find that fully revealing horizontal product information at the advance selling stage is never optimal to the firm, but revealing either partial or no product information can be optimal depending on the underlying consumer preferences. Our finding that partial information disclosure is sometimes optimal to the firm is in contrast to the result in the literature of horizontal information provision that a firm maximizes profit by revealing either no or full information to consumers.
Original languageEnglish
JournalManagerial and Decision Economics
Early online date27 Jul 2021
DOIs
Publication statusE-pub ahead of print - 27 Jul 2021

Bibliographical note

Funding information: Central University Basic Research Fund of China; Wuhan University, Grant/Award Number: Youth Scholar Team in Social Science of Wuhan University

Publisher Copyright:
© 2021 John Wiley & Sons, Ltd.

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