The Role of Discount Vouchers in Market with Customer Valuation Uncertainty

Production and Operations Management, Vol 24, No. 4, pp 665-679

33 Pages Posted: 25 Jan 2016

See all articles by Fei Gao

Fei Gao

Indiana University Bloomington

Jian Chen

Tsinghua University - School of Economics and Management

Date Written: October 16, 2014

Abstract

Online discount voucher market In the discount voucher market, customers usually face two types of valuation uncertainty, namely, preference uncertainty and consumption state uncertainty. Preference uncertainty is related to the customer's lack of relevant experience with the merchant, whereas consumption state uncertainty is related to the advance selling nature of the discount voucher mechanism. By taking a comprehensive perspective (i.e., considering revenue management and promotion effect at the same time), we find (i) no show of voucher buyers may not be a good thing for the merchant, especially for those large or start-up ones; (ii) offering refund may always hurt the merchant's profit and the PayPal model may not be optimal in terms of maximizing social welfare; and (iii) market segmentation is not necessary for the profitability of promotion.

Keywords: customer valuation uncertainty, discount vouchers, revenue management, marketing-operations interface

Suggested Citation

Gao, Fei and Chen, Jian, The Role of Discount Vouchers in Market with Customer Valuation Uncertainty (October 16, 2014). Production and Operations Management, Vol 24, No. 4, pp 665-679, Available at SSRN: https://ssrn.com/abstract=2510988

Fei Gao (Contact Author)

Indiana University Bloomington ( email )

1309 E 10th St
Bloomington, IN 47405
United States

Jian Chen

Tsinghua University - School of Economics and Management ( email )

Beijing, 100084
China

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