Title: Advanced sales and competition in a service industry

Authors: Miquel Carreras-Simó

Addresses: Department of Economics, University of Girona, C/Universitat de Girona, 10, Girona 17071, Spain

Abstract: This paper analyses the relationship between a firms' interest in advance sales and the competition intensity in the market when consumers adopt a strategic behaviour in purchasing. We demonstrate how firms in a more competitive market have more incentives to offer advance sales. When a firm increases their advanced sales, the profits of last-minute sales go down; therefore, a firm will aim to sell in advance until the expected profit on the margin for advanced sales equals the marginal profit lost for last-minute sales. When competition goes up, the marginal profit lost at last-minute market for increase advanced sales goes down, so it is in the firms' best interest to increase advanced sales and to decrease last-minute sales. Therefore, competition encourages advanced sales.

Keywords: services marketing; game theory; advance sales; competition intensity; service industry; strategic purchasing; marginal profit.

DOI: 10.1504/IJRM.2016.076142

International Journal of Revenue Management, 2016 Vol.9 No.1, pp.1 - 16

Received: 25 Feb 2015
Accepted: 05 Oct 2015
Published online: 27 Apr 2016 *

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