A reverse mechanism of advance selling driven by information asymmetry and competition

Enlightened by popular online business practices emerging in recent years, we aim to investigate a problem involving a flipped procedure in contrast with traditional advance selling, which is referred to as reverse advance selling (RAS) in this paper. We consider competition and information asymmetry in the market and discuss how they affect the decisions in reverse advance selling. We propose two models to evaluate the benefits of RAS and to characterize the conditions that optimize the pricing and ordering policies for retailers under competition. Furthermore, we examine the impact of factors such as market share, online review, and waiting time and provide insights for retailers to make decisions. The results demonstrate the advantage of adopting RAS when retailers or customers face uncertainty and it is beneficial to update review information. This paper also finds that market share positively affects the profit as well as the ordering quantities of the retailer, while online reviews have opposite impacts on its discount and ordering decisions. The results can guide retailers to make flexible ordering plans that better cater to market demand.

Automated summary

Inspired by recent popular online business practices, this paper investigates the problem of reverse advance selling (RAS), a flipped procedure compared to traditional advance selling. The study considers competition and information asymmetry in the market and discusses their impact on decisions in reverse advance selling. Two models are proposed to evaluate the benefits of RAS and determine the optimal pricing and ordering policies for retailers in a competitive environment. The findings provide insights on the impact of market share, online reviews, and waiting time, and highlight the advantages of RAS in uncertain situations and the importance of updating review information.