*Advance Purchase Discounts Versus Clearance Sales

24 Pages Posted: 7 Sep 2010

See all articles by Marc Möller

Marc Möller

Department of Economics, University of Berne

Makoto Watanabe

VU University Amsterdam, Tinbergen Institute

Date Written: 2009-09-21

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.

Suggested Citation

Möller, Marc and Watanabe, Makoto, *Advance Purchase Discounts Versus Clearance Sales (2009-09-21). The Economic Journal, Vol. 120, Issue 547, pp. 1125-1148, September 2010. Available at SSRN: https://ssrn.com/abstract=1670363 or http://dx.doi.org/10.1111/j.1468-0297.2009.02324.x

Marc Möller (Contact Author)

Department of Economics, University of Berne ( email )

Schanzeneckstrasse 1
Bern, 3001
Switzerland
0041 (0)31 631 8078 (Phone)

Makoto Watanabe

VU University Amsterdam, Tinbergen Institute ( email )

De Boelelaan 1105,
Amsterdam, North Holland 1081 HV
Netherlands
+31 20 5986030 (Phone)

HOME PAGE: http://makoto.wtnb.googlepages.com

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