Policies for Selecting the Advance Selling Mode in a Supply Chain Considering Network Externalities

ABSTRACT The marketing strategy of advance selling new products through e‐commerce channels is becoming increasingly popular among merchants and users. In advance selling on e‐commerce platforms, network externalities and the probability of consumer satisfaction with products are important factors affecting consumers' strategic behavior. This study considers network externalities and the probability of consumer satisfaction with products in the advance selling decision‐making problem in the supply chain. Using game theory and prospect theory, three scenario models—advance selling considering network externalities, advance selling without considering network externalities, and nonadvance selling—are designed to construct theoretical models for supply chain decision‐making. The optimal decision‐making problem of supply chain members is discussed. Furthermore, through a comparison of pricing, demand and profits, the impacts of advance selling with or without considering network externalities on the decisions of retailers and manufacturers are analyzed. By comparing the differences in decision‐making between manufacturers and retailers, the feasible area for advance selling under network externalities is obtained. Furthermore, through numerical experiments, the impacts of the strength of network externalities, and the probability of consumer satisfaction with products on the decision‐making of supply chains are analyzed.