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Advance selling in the presence of product diffusion effect

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Abstract

Product diffusion refers to the phenomenon that the later demand is dependent on the early sales. To investigate how a firm’s advance selling strategy is affected by the effect of product diffusion, we consider a monopolist seller who sells a fashionable product in a market that comprises of myopic and strategic consumers over two periods (i.e., the advance selling season and the regular selling season). For a linear product diffusion effect we find that, when the effect of product diffusion is positive, the seller may set an extremely high advance selling price to induce the strategic consumers to purchase in the regular selling season, which is counter-intuitive. Moreover, the optimal procurement quantity for the seller may increase in the negative effect of product diffusion and decrease in the amount of strategic consumers. When we extend our model to consider a concave quadratic product diffusion effect, however, the optimal procurement quantity is concave in the amount of strategic consumers. Numerical studies are further presented to discuss the managerial insights.

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Acknowledgments

The authors would like to thank the editor and referees for their insightful suggestions to significantly improve the quality of the paper. This research was supported by the National Natural Science Foundation of China under Grants Nos. 71371176, 71571115 and 71320107004.

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Authors and Affiliations

  1. School of Management, University of Science & Technology of China, Hefei, 230026, China

    Xiaoyan Xu & Xuemei Li

  2. School of Management, Zhejiang University, Hangzhou, 310058, China

    Xiaoyan Xu

  3. SHU-UTS SILC Business School, Shanghai University, Shanghai, 201899, China

    Yiwen Bian & Yanhong Sun

Authors
  1. Xiaoyan Xu
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  2. Xuemei Li
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  3. Yiwen Bian
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  4. Yanhong Sun
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Corresponding author

Correspondence to Yanhong Sun.

Additional information

Xiaoyan Xu is a professor of School of Management, Zhejiang University, Hangzhou, China. She received the Ph.D. degree in management science and engineering from University of Science & Technology of China (USTC) in 2006. Her research interests are operations management, the interface on finance and operations management. She has published academic papers in many journals, including Omega, Decision Support Systems, Computers & Industrial Engineering, etc.

Xuemei Li is currently working toward the Ph.D. degree in management science at the School of Management, USTC, Hefei, China. Her research interest is operations management.

Yiwen Bian is an associate professor of management science in SILC Business School, Shanghai University, Shanghai, China. He received the Ph.D. degree in management science and engineering from USTC in 2006. His research interests are decision analysis and operations management. He has published papers in many journals, including Omega, Energy Policy, International Journal of Cleaner Production, etc.

Yanhong Sun is a lecturer of management science in SILC Business School, Shanghai University, Shanghai, China. She received the Ph.D. degree in management science and engineering from USTC in 2010. Her research interests are operations management and supply chain management. She has published papers in Decision Support Systems, IEEE Transactions on Systems, Man, and Cybernetics, International Journal of Production Economics, etc.

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Xu, X., Li, X., Bian, Y. et al. Advance selling in the presence of product diffusion effect. J. Syst. Sci. Syst. Eng. 26, 77–99 (2017). https://doi.org/10.1007/s11518-015-5285-x

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  • DOI: https://doi.org/10.1007/s11518-015-5285-x

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