Advance selling when consumers regret / Javad Nasiry in Management science, Vol. 58 N° 6 (Juin 2012)  

Public ISBD [article]  inManagement science > Vol. 58 N° 6 (Juin 2012) . - pp.1160-1177 Titre : Advance selling when consumers regret Type de document : texte imprimé Auteurs : Javad Nasiry, Auteur ; Ioana Popescu, Auteur Année de publication : 2012 Article en page(s) : pp.1160-1177 Note générale : Management Langues : Anglais (eng) Mots-clés : Advance selling Behavioral pricing Consumer regret Refunds options Résumé : We characterize the effect of anticipated regret on consumer decisions and on firm profits and policies in an advance selling context where buyers have uncertain valuations. Advance purchases trigger action regret if valuations turn out to be lower than the price paid, whereas delaying purchase may cause inaction regret from missing a discount or facing a stockout. Consumers whom we describe as emotionally rational act strategically in response to the firm's policies and in anticipation of regret. In this context, regret explains two types of behavioral patterns: inertia (delayed purchase) and frenzies (buying early at negative surplus). We show how firms should optimally respond to consumer regret and also characterize a normative regret threshold above which they should not advance sell. Action regret reduces profits as well as the value of advance selling and booking limit policies for price-setting firms; inaction regret has the opposite effects. These effects are diminished by capacity constraints and are reversed for firms facing price pressure in the advance period (owing, e.g., to competition or market heterogeneity). Regret heterogeneity explains premium advance selling for the capacity-constrained firm, which may benefit from larger shares of regretful buyers. Finally, we show how the negative effects of regret on profits can be mitigated by regret-priming marketing campaigns and by offering refunds or options or allowing resales. Our results highlight the importance of assessing the relative strength of regret within and across market segments and of accounting for these factors in pricing and marketing policies. ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/6/1160.abstract [article] Advance selling when consumers regret [texte imprimé] / Javad Nasiry, Auteur ; Ioana Popescu, Auteur . - 2012 . - pp.1160-1177. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 6 (Juin 2012) . - pp.1160-1177 Mots-clés : Advance selling Behavioral pricing Consumer regret Refunds options Résumé : We characterize the effect of anticipated regret on consumer decisions and on firm profits and policies in an advance selling context where buyers have uncertain valuations. Advance purchases trigger action regret if valuations turn out to be lower than the price paid, whereas delaying purchase may cause inaction regret from missing a discount or facing a stockout. Consumers whom we describe as emotionally rational act strategically in response to the firm's policies and in anticipation of regret. In this context, regret explains two types of behavioral patterns: inertia (delayed purchase) and frenzies (buying early at negative surplus). We show how firms should optimally respond to consumer regret and also characterize a normative regret threshold above which they should not advance sell. Action regret reduces profits as well as the value of advance selling and booking limit policies for price-setting firms; inaction regret has the opposite effects. These effects are diminished by capacity constraints and are reversed for firms facing price pressure in the advance period (owing, e.g., to competition or market heterogeneity). Regret heterogeneity explains premium advance selling for the capacity-constrained firm, which may benefit from larger shares of regretful buyers. Finally, we show how the negative effects of regret on profits can be mitigated by regret-priming marketing campaigns and by offering refunds or options or allowing resales. Our results highlight the importance of assessing the relative strength of regret within and across market segments and of accounting for these factors in pricing and marketing policies. ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/6/1160.abstract

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