Advance Selling Decision for Perishable Products in the Presence of Strategic Consumers

Abstract

The advance selling strategy is often used in the sales process of perishable products with a short life cycle. The advance sales can encourage more strategic consumers to buy the product in advance with a discount price due to the extended sales period, but may also bring more profits for the seller. The seller often faces a newsvendor problem, i.e., they must order the joint decisions about an advance-selling price and inventory with uncertain demand in a two-period season, where the first period is the advance selling period and the second is the spot selling (and consumption) period. This paper establishes a two-period theoretical model to discuss the interaction between the advance selling decisions and consumers' strategic purchasing behaviors. The game model show how the seller should optimally respond to consumers' strategic behavior and characterize a cost threshold above which they should whether to advance sell. Finally, it is found that the advance selling strategy is not always optimal, but is related to the parameters of the cost per unit, the consumers' valuations and heterogeneity.