Advance Purchase Discounts versus Clearance Sales Articles uri icon

authors

  • MÖLLER, MARC
  • WATANABE WATANABE, MAKOTO

publication date

  • September 2010

start page

  • 1125

end page

  • 1148

issue

  • 547

volume

  • 120

International Standard Serial Number (ISSN)

  • 0013-0133

abstract

  • This article considers advance selling problems. It explains why some goods (e.g. airline tickets) are sold cheap to early buyers, while others (e.g. theatre tickets) offer discounts to those who buy late. We
    derive the profit maximising selling strategy for a monopolist when
    aggregate demand is certain but buyers face uncertainty about their
    individual demands. When aggregate demand exceeds capacity, both Advance
    Purchase Discounts as well as Clearance Sales might be optimal. We
    determine how the comparison of these price discrimination strategies
    depends on the rationing rule, capacity costs and the availability of
    temporal capacity limits, price commitment and resale.