Advance selling strategies for oligopolists by considering product diffusion effect

The purpose of this paper is to study the advance selling strategies for oligopolists when considering the product diffusion effect.

The authors consider a market that composes of two competitive sellers who are different in their reputation. The two firms sell the same product in the market over two periods (i.e. the advance selling season and the regular selling season). Due to the effect of product diffusion, the demand of each firm in the regular selling season is dependent on the two firms’ advance demands.

For the firm with lower reputation, it is beneficial to decrease the advance selling price with the diffusion effect caused by its advance demand. For the firm with higher reputation, it is also beneficial to decrease the advance selling price with the diffusion effect caused by its advance demand if the consumers’ enthusiasm for the product in regular selling season is high enough; otherwise it should not decrease his advance selling price since this practice cannot greatly increase his demand.

The obtained results can provide operational managers in reality with valuable suggestions in making advance selling decisions.

The paper is among the first to investigate the impact of product diffusion effect on a firm’s advance selling strategy in a competitive setting.