Abstract
AbstractThis paper investigates a full payment presale mechanism of new products, in which consumers make a full payment while booking and are allowed to cancel their bookings with full refunds before the products’ delivery time. To fully utilize the limited capacity, the manufacturer can incorporate the overbooking policy into the full payment presale mechanism by jointly setting its sales price and booking limit. We analyze the manufacturer's revenue maximization problem and develop some useful properties. In addition, we propose an iterative algorithm for solving this problem. Finally, we conduct numerical computations to evaluate the overbooking policy and examine the impacts of relevant parameters on the expected profits. We find that the overbooking policy will benefit the manufacturer. However, a higher capacity will not necessarily lead to a higher profit for a manufacturer with an overbooking policy.
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