On the Value of Commitment and Availability Guarantees When Selling to Strategic Consumers

@article{Su2009OnTV,
  title={On the Value of Commitment and Availability Guarantees When Selling to Strategic Consumers},
  author={Xuanming Su and Fuqiang Zhang},
  journal={Management Science},
  year={2009},
  volume={55},
  pages={713-726}
}
T paper studies the role of product availability in attracting consumer demand. We start with a newsvendor model, but additionally assume that stockouts are costly to consumers. The seller sets an observable price and an unobservable stocking quantity. Consumers anticipate the likelihood of stockouts and determine whether to visit the seller. We characterize the rational expectations equilibrium in this game. We propose two strategies that the seller can use to improve profits: (i) commitment… CONTINUE READING
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