Advance Selling Strategy for a Supply Chain Consisting of Fairness-Sensitive Consumers

Our research analyzes advance selling strategies offirms in contexts where consumers are sensitive to fairness. In scenarios of unlimited capacity, firms engage in advance selling when marginal costs are below consumer valuations, setting high spot prices and discounted advance prices if costs exceed a specific threshold, or equalizing both prices when costs are lower. Conversely, under limited capacity conditions, strategic variations emerge: firms use premium pricing for unrestricted advance sales and lower spot prices at high capacities. At medium capacities, they offer advance purchases at discounts, later raising spot prices. At low capacities, firms restrict advance sales, maintaining high spot prices, and cease advance selling when capacities are critically low. This study demonstrates that consumer sensitivity to inequity negatively influences the optimal advance selling price, profitability, and the firm's benefits of advance selling in scenarios of both unlimited and limited capacity.