The Role of Discount Vouchers in Market with Customer Valuation Uncertainty

Abstract

Online discount voucher market In the discount voucher market, customers usually face two types of valuation uncertainty, namely, preference uncertainty and consumption state uncertainty. Preference uncertainty is related to the customer's lack of relevant experience with the merchant, whereas consumption state uncertainty is related to the advance selling nature of the discount voucher mechanism. By taking a comprehensive perspective (i.e., considering revenue management and promotion effect at the same time), we find (i) no show of voucher buyers may not be a good thing for the merchant, especially for those large or start-up ones; (ii) offering refund may always hurt the merchant's profit and the PayPal model may not be optimal in terms of maximizing social welfare; and (iii) market segmentation is not necessary for the profitability of promotion. Disciplines Business | Finance and Financial ManagementThis journal article is available at ScholarlyCommons: http://repository.upenn.edu/fnce_papers/67Electronic copy available at: http://ssrn.com/abstract=2510988 The Role of Discount Vouchers in Market with Customer Valuation Uncertainty Fei GaoThe Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104, feigao@wharton.upenn.edu Jian ChenResearch Center for Contemporary Management, Tsinghua University, Beijing 100084, chenj@sem.tsinghua.edu.cn AbstractOnline discount voucher market In the discount voucher market, customers usually face two types of valuation uncertainty, namely, preference uncertainty and consumption state uncertainty. Preference uncertainty is related to the customer's lack of relevant experience with the merchant, whereas consumption state uncertainty is related to the advance selling nature of the discount voucher mechanism. By taking a comprehensive perspective (i.e., considering revenue management and promotion effect at the same time), we find (i) no show of voucher buyers may not be a good thing for the merchant, especially for those large or start-up ones; (ii) offering refund may always hurt the merchant's profit and the PayPal model may not be optimal in terms of maximizing social welfare; and (iii) market segmentation is not necessary for the profitability of promotion.

Data Mining Algorithm for Demand Forecast Analysis on Flash Sales Platform

“…Groupon is a famous daily deal website. Gao and Chen [14] said " ese online voucher vendors sell vouchers in specific cities at discounts ranging from 50% to 90%. ese vouchers are typically offered by local businesses, such as restaurants and spas."…”

Optimal advance selling discount strategy with future‐oriented consumers

“…In contrast, product quality or value is most likely to be the future‐oriented consumers' concern because these directly affect the purchasers' expected utility. Thus, we define a discount factor α that represents the degree of quality or value perception of new products for the informed consumers faced with an advance price discount (i.e., α ∈(0,1]) (Gao & Chen, ; Li et al, ; Kwon & Weingart, ; Su & Zhang, ). Here, we first assume that the value discount factor is an independent variable; then, we will extend to the cases in which it varies across consumers or depends on the advance price discount.…”

Coordination of traditional and online group-buying channels considering website promotion effort

“…Edelman et al (2016) [13] investigated the pro tability, pricing discrimination, and advertising e ect of discount vouchers. Gao and Chen (2015) [14] found that no show of voucher buyers could be good for (large or start-up) sellers. Ni et al (2015) [15] studied the optimal pricing strategy of sellers by classifying customers into collectivist and individualistic customers according to actual market information.…”

“…However, as a platform for implementing group-buying, the corresponding websites should receive greater attention. The mechanism of GBW experienced the evolution from dynamic pricing model (e.g., [6{8]) to xedpricing model (e.g., [14,15,17]). The dynamic model focuses on the quantity and pricing scheme, that is, the greater the quantity, the lower the price.…”