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- Title
Electronic Tickets, Smart Cards, and Online Prepayments: When and How to Advance Sell.
- Authors
Jinhong Xie; Shugan, Steven M.
- Abstract
Advance selling occurs when sellers allow buyers to purchase at a time preceding consumption (Shugan and Xie 2000). Electronic tickets, smart cards, online prepayments, and other technological advances make advance selling possible for many, if not all, service providers. These technologies lower the cost of making complex transactions at a greater distance from the seller's site. They also give sellers more control over advance selling by decreasing arbitrage. As technology enhances the capability to advance sell, more academic attention is vital. This paper strives to exploit these technologies by developing advance-selling strategies. Until recently, advance-selling research focused on the airline industry and specific characteristics of that industry. These characteristics included the price insensitivity of late arrivals (e.g., business travelers) compared with early arrivals (e.g., leisure travelers), demand uncertainty across flights on the same day, and capacity constraints. Recent findings by Shugan and Xie (2000) show that advance selling is a far more general marketing tool than previously thought. It does not require these industry-specific characteristics. It only requires the existence of buyer uncertainty about future valuations. Moreover, sellers without the ability to price discriminate can use advance selling to improve profits to the level of first-degree price discrimination. This finding is important because buyers are nearly always uncertain about their future valuations for most services (e.g., the utility of next year's vacation or a future college education). In this paper, we take the next step from Shugan and Xie (2000). We show that advance-selling profits do not come from buyer surplus, but from more buyers being able to purchase. We determine when and how to advance sell in a variety of situations, including situations with limited capacity, second-period arrivals, refunds, buyer risk...
- Subjects
ELECTRONIC commerce; SMART cards; PRICE discrimination; SELLING; MARKETING; INTERNET sales; ARBITRAGE
- Publication
Marketing Science, 2001, Vol 20, Issue 3, p219
- ISSN
0732-2399
- Publication type
Article
- DOI
10.1287/mksc.20.3.219.9765