Advance Pricing of Services and Other Implications of Separating Purchase and Consumption

It is important to differentiate between the act of purchasing and the act of consuming. Understanding this separation provides many implications and areas for future research. For example, the separation creates buyer uncertainty about the utility from consumption. Consider buying a ticket for a concert in advance. Here, buyers may be uncertain about their future state (e.g., health, expected conflicts, mood) at the time of the concert. This article explores the desirability and implications of this separation and the creation of it (which is often a consequence of the service provider’s selling strategy). The authors show that service providers can improve profits by advance ticketing, perhaps, to the level of first-degree price discrimination (although usually there is no loss in aggregate consumer surplus). These profits are possible despite a service provider’s inability to price discriminate.