Leadership Investigate

Advance Selling When Consumers Regret

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Executive Summary

The authors characterize the effect of anticipated regret on consumer decisions, firm profits and policies, in an advance selling context where buyers have uncertain valuations. Advance purchases trigger action regret if valuations turn out to be lower than the price paid, whereas delaying purchase may cause inaction regret from missing a discount or facing a stock-out. Emotionally rational consumers act strategically in response to the firm's policies and in anticipation of regrets. In this context, regret explains two types of behavioral patterns: inertia (delayed purchase) and frenzies (buying early at negative surplus).

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