Supply Chain Members’ Decisions Considering Consumer Time Dimension Mental Accounting In Advance Selling

Advance selling activities based on e-commerce platforms receive much attention from consumers,which is a two-stage sales mode.However,many consumers indicate that they are relatively happy to pay a deposit and feel more burdened at the final payment stage.That is,consumers feel differently at the two moments when they know they will pay the same total amount for the product.This psychological behavior can be explained by mental accounting.First,with advance selling mode,this research builds a game theoretical model to investigate how consumers’ mental accounting affects the optimal pricing and ordering decisions of supply chain members under wholesale price and revenuesharing contracts.The analysis shows that,under wholesale price contracts,regardless of the optimal wholesale price set by the supplier,a portion of the consumers will forgo the deposit paid and the optimal order quantity for the retailer is always equal to the order quantity of the consumers at the final payment stage.In exceptional cases,the optimal wholesale price may be equivalent to the retail price.The supplier’s optimal wholesale price increases monotonically with the consumer’s time coefficient for price and decreases monotonically with the consumer’s time coefficient for product valuation.Furthermore,under a revenue-sharing contract,the study shows that the supplier’s optimal wholesale price may be equal to the cost in certain situations.Additionally,a supplier’s optimal wholesale price exists such that none of the consumers will give up the deposit they paid.Second,this paper introduces the concept of the time sensitivity of consumers and focuses on the effect of the advance selling interval on consumers’ perceived valuation and price of the product to explore the optimal sales decisions of suppliers and retailers.The results show that when dealing with high time-sensitive consumers,retailers should shorten the advance selling interval to increase sales and thus sales profit.In addition,when dealing with low time-sensitive consumers,retailers can set a larger deposit percentage.Finally,the wholesale price set by the supplier and the number of people who forego the final payment in the advance selling mode vary with the time sensitivity of the consumers depending on the consumer’s time coefficient for the product price.The study contributes to the understanding of mental accounting in advance selling and has implications for supply chain contract design.