Advance selling strategy and return strategy considering reference price effect and consumers behaviors

Advance selling enables manufacturers to obtain market demand information in advance. However, due to the uncertainty of consumer product valuation, manufacturers are also faced with the risk of a large number of product returns. Using the newsvendor model and the consumer expected utility theory, and considering the influence of reference price effect on consumer purchase behavior and manufacturer's advance selling pricing strategy, the expected profit model under the three strategies of single advance selling, advance selling return not for sale and advance selling return for sale are constructed, then the optimal production and the value range of return compensation price under different return strategies are obtained. Finally, these models are compared and analyzed. It is found that there is a critical threshold value of return compensation price in the strategy of high price advance selling and low price advance selling. The ratio of informed consumers with reference price effect determines the pricing strategy of manufacturers in the advance selling period, and under a low price pre-sale strategy, the pre-sale price decreases with the increase of return compensation price and reference price coefficient. © 2021, Editorial Office of Control and Decision. All right reserved.