Management Science and Information Systems#39 Seminar(2013-01)

Topic:Selling to Customers With Valuation Uncertainties: The Role of Discount Vouchers as Marketing and Revenue Management Strategies

Speaker:Chen Jian, Tsinghua University

Time:Monday, 15 April,10：30－11：30 am

Location:Room K01, Guanghua Building 2

Abstract:In the discount voucher market, customers usually face two types of valuation uncertainties, namely,preference uncertaintyandconsumption state uncertainty. Preference uncertainty is related to the customerrsquos lack of relevant experience with the merchant, whereas consumption state uncertainty is related to the advance selling nature of the discount voucher mechanism. Given these two types of uncertainties, optimal voucher price is derived. And given the merchantrsquos forward-looking behavior, we propose a capacity allocation rule between the discount voucher channel and spot selling channel. Based on the optimal voucher price and quantity, we find that the customer no-show behavior may not be a good thing for large or start-up merchants because they will possibly lose a potential high-value customer when a voucher buyer fails to experience the service and eliminate his preference uncertainty. Moreover, given a revenue sharing policy between the merchant and the voucher vendor, we find that, compared to the no-refund situation, (i) the merchant always earns less expected profit by offering refund, and (ii) the refund offered by the voucher vendor will increase the total social welfare, whereas the refund offered by a merchant will decrease the total social welfare. Finally, we find that the customer dilution behavior may not be a bad thing for merchants when the diluted customersrsquo network effect is considered.

Your participation is warmly welcomed!

Attached CV.