2014
DOI: 10.1287/mksc.2014.0851
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Sell Probabilistic Goods? A Behavioral Explanation for Opaque Selling

Abstract: P robabilistic or opaque selling, whereby a seller hides the exact identity of a product until after the buyer makes a payment, has been used in practice and received considerable attention in the literature. Under what conditions, and why, is probabilistic selling attractive to firms? The extant literature has offered the following explanations: to price discriminate heterogeneous consumers, to reduce supply-demand mismatches, and to soften price competition. In this paper, we provide a new explanation: to ex… Show more

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Cited by 87 publications
(47 citation statements)
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References 25 publications
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“…Indeed, this could at least partially explain why many adopters of PS are not seeing a large profit advantage. However, in contrast to such intuition, Huang and Yu (2014) find that incomplete information can create an additional advantage for PS. In their model, PS would not be profitable with fully rational consumers but can be profitable when consumers display bounded rationality.…”
Section: Limitations and Future Researchmentioning
confidence: 67%
“…Indeed, this could at least partially explain why many adopters of PS are not seeing a large profit advantage. However, in contrast to such intuition, Huang and Yu (2014) find that incomplete information can create an additional advantage for PS. In their model, PS would not be profitable with fully rational consumers but can be profitable when consumers display bounded rationality.…”
Section: Limitations and Future Researchmentioning
confidence: 67%
“…Fay and Xie (2008) first defined and analyzed probabilistic selling strategy used by a multi-item retailer to explore the core mechanism of opaque selling. The Marketing and Strategy literature on probabilistic selling focuses on customer preference heterogeneity Xie, 2008, 2010), consumer bounded rationality (Huang and Yu, 2014), price discrimination (Rice et al, 2014), market structure (Zhang et al, 2014) etc to demonstrate the advantage of probabilistic selling over other selling strategies.…”
Section: Probabilistic Sellingmentioning
confidence: 99%
“…Lin et al (2014), in their study of how forward-looking experiential learning influences market outcomes, assume that consumers employ a cognitively simple "index heuristic." Huang and Yu (2014) examine the efficacy of "probabilistic selling" when consumers use anecdotal reasoning. Our boundedly rational model of consumer choice is an alternative to Bayesian updating models, which yield far more complex descriptions of consumer choice (Mehta et al 2008) and whose approach of updating prior beliefs-based on the assessment of likelihood functions and the coherent use of sample information-does not capture the decision process of a typical consumer (Camerer 1998).…”
Section: Literature Reviewmentioning
confidence: 99%