Pricing and the News Vendor Problem: a Review with Extensions
Operations Research
Selling to the Newsvendor: An Analysis of Price-Only Contracts
Manufacturing & Service Operations Management
Market Segmentation, Advanced Demand Information, and Supply Chain Performance
Manufacturing & Service Operations Management
Hospital Operating Room Capacity Expansion
Management Science
Managing Capacity and Inventory Jointly in Manufacturing Systems
Management Science
Integrating Replenishment Decisions with Advance Demand Information
Management Science
Commissioned Paper: An Overview of Pricing Models for Revenue Management
Manufacturing & Service Operations Management
Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments
Manufacturing & Service Operations Management
The Dynamic Pricing Problem from a Newsvendor's Perspective
Manufacturing & Service Operations Management
Inventory Control with Limited Capacity and Advance Demand Information
Operations Research
A Partially Observed Markov Decision Process for Dynamic Pricing
Management Science
Supply Chain Choice on the Internet
Management Science
Sale Timing in a Supply Chain: When to Sell to the Retailer
Manufacturing & Service Operations Management
Inventory Management with Advance Demand Information and Flexible Delivery
Management Science
Two-Wholesale-Price Contracts: Push, Pull, and Advance-Purchase Discount Contracts
Manufacturing & Service Operations Management
Structural Properties of Buyback Contracts for Price-Setting Newsvendors
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
Dynamic Pricing for Nonperishable Products with Demand Learning
Operations Research
Advance Selling When Consumers Regret
Management Science
A Multiordering Newsvendor Model with Dynamic Forecast Evolution
Manufacturing & Service Operations Management
Hi-index | 0.00 |
This paper investigates a capacity planning strategy that collects commitments to purchase before the capacity decision and uses the acquired advance sales information to decide on the capacity. In particular, we study a profit-maximization model in which a manufacturer collects advance sales information periodically prior to the regular sales season for a capacity decision. Customer demand is stochastic and price sensitive. Once the capacity is set, the manufacturer produces and satisfies customer demand (to the extent possible) from the installed capacity during the regular sales period. We study scenarios in which the advance sales and regular sales season prices are set exogenously and optimally. For both scenarios, we establish the optimality of a control band or a threshold policy that determines when to stop acquiring advance sales information and how much capacity to build. We show that advance selling can improve the manufacturer's profit significantly. We generate insights into how operating conditions (such as the capacity building cost) and market characteristics (such as demand variability) affect the value of information acquired through advance selling. From this analysis, we identify the conditions under which advance selling for capacity planning is most valuable. Finally, we study the joint benefits of acquiring information for capacity planning through advance selling and revenue management of installed capacity through dynamic pricing.