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- Title
Early Sales of Seasonal Products with Weather-Conditional Rebates.
- Authors
Gao, Fei; Demirag, Ozgun Caliskan; Chen, Frank Y.
- Abstract
Some retailers of seasonal products adopt weather-conditional rebate programs to induce early sales and increase profits. In such promotions, customers who buy the product in an advance preselling period are offered rebates if a pre-specified weather condition is realized during the later normal selling season. We investigate the potential benefits of these programs for retailers. We show that the weather-conditional rebate program can increase sales by price discriminating among a customer's post-purchase states. Taking advantage of the early sales, it can also reduce the inventory holding cost and ordering cost, and hence can increase the retailer's expected profits. In addition, we numerically investigate the sensitivity of the rebate program's effectiveness to the model parameters and illustrate its advantages over an advance-discount policy.
- Subjects
REBATES; SEASONAL markets; SEASONAL sales promotion; SPECIAL sales; ECONOMIC seasonal variations; TIME-based pricing
- Publication
Production & Operations Management, 2012, Vol 21, Issue 4, p778
- ISSN
1059-1478
- Publication type
Article
- DOI
10.1111/j.1937-5956.2011.01298.x