Advance selling, competition, and brand substitutability

Abstract

I analyze how information structure influences the profitability of advance selling in the presence of a competitor. Two firms produce different brands serving heterogeneous consumers. In advance, consumers know the utility they will get from their preferred brand but can be uninformed about its identity, how much they will dislike their nonpreferred brand, or both. The firms set prices in the main selling season (when uncertainty is resolved) simultaneously, but one firm can set an advance selling price (while there is still uncertainty). Competition enhances the profitability of advance selling when consumers are uninformed about which brand they will prefer.