Advance Selling Strategy for Risk-averse Strategic Customers

Abstract

In recent years, the advance selling strategy has been gradually applied to the sales of goods in various industries, including consumer electronics, fashion, travel, ticketing, and seasonal goods. Compared to traditional sales methods, retailers can use an advance selling strategy to attract consumers to order goods in advance, thereby mitigating the uncertainty of demand and increasing profits. As the advance selling strategy will make it impossible for consumers to accurately perceive the value of the product during the advance selling period, there may be a bias in the valuation of the product, which may result in consumers' decision not to book products in advance. The thesis studies a single advance selling strategy for storable goods. Based on consumer arrival rate and the distribution of product valuation, the thesis offers the optimal advance selling price for the single advance selling strategy that maximises consumers' expected profit.