Optimal Strategies for Online Advance Selling With Random Rewards-Case From China

Advance selling helps retailers who often face a newsvendor problem to reduce demand uncertainty. With the development of e-commerce and online retailing, online retailers are no longer limited to adopting single advance selling strategy. With the support of information technology and online payment, the combined strategy of random reward promotion and advance selling becomes increasingly easy to apply. In this article, the model of online advance selling with random rewards strategy is developed based on single advance selling model. The result shows that there is a threshold which determines which of the two strategies is optimal and the numerical analysis further verifies the research results, through comparison and analysis of the advance selling price, consumer utility and retailer's total profit of single advance selling strategy and advance selling with random rewards strategy. Furthermore, the study also finds the effect of the expected utility of random rewards on the advance selling price.