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Selling to Strategic Customers: Opaque Selling Strategies

  • Kinshuk Jerath
  • Serguei Netessine
  • Senthil K. Veeraraghavan
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 131)

Abstract

Over the past few years, firms in the travel and entertainment industries have begun using novel sales strategies for revenue management. In this chapter, we study a selling strategy called opaque selling, in which firms guarantee one of several fully specified products, but hide the identity of the product that the consumer will actually obtain until after the purchase is completed. Several firms such as Hotwire, Priceline, and Mystery Flights engage in opaque selling of travel products. The academic literature in this area is recent and evolving. We first survey the nascent literature on opaque selling strategies. After presenting the current state of theory and practice, we analyze in-depth a model of competing firms selling horizontally differentiated products through an opaque channel. Consumers strategically time their purchases by developing rational expectations about future availability in the opaque market, keeping in mind that demand is uncertain and product supply could be limited. This model helps illustrate the conditions under which opaque selling can increase firm profits. We conclude the chapter by discussing ongoing research and charting out future research directions.

Keywords

Price Discrimination Demand Uncertainty Revenue Management Rational Expectation Equilibrium Full Market 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag US 2009

Authors and Affiliations

  • Kinshuk Jerath
    • 1
  • Serguei Netessine
    • 2
  • Senthil K. Veeraraghavan
    • 2
  1. 1.Tepper School of BusinessCarnegie Mellon UniversityPittsburghUSA
  2. 2.The Wharton SchoolUniversity of PennsylvaniaPhiladelphiaUSA

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