Pre-order strategies with demand uncertainty and consumer heterogeneity

We study pre-order strategies in a two-period, continuous-valuation model with the presence of both demand uncertainty and consumer heterogeneity. Consumers face different levels of uncertainty about their valuations in the pre-order stage: experienced consumers know their individual valuations while inexperienced consumers only know the distribution of their valuations. We find that in the pre-order stage the profit-maximizing retailer may target either all inexperienced consumers with a deep pre-order discount, or experienced consumers with a moderate pre-order discount or a pre-order premium. Furthermore, in an extended model where the retail price is endogenously determined, the retailer’s pricing structure mirrors that of the benchmark model.