An empirical research on marketing strategies of different risk preference merchant

Abstract

Holiday merchandise has unique demand characteristics, unofficial start data, and a limited life cycle. In an intensely competitive market, individual merchants are able to get more sales opportunities if they display their products earlier. In this study, a time-variant variance and time-variant expected market demand model are introduced to investigate the order strategies that are used by risk-averse holiday merchants. Our results show that risk preference, market uncertainty, and market power have a significant effect on the merchant's market strategies. Risk-averse merchants prefer to enhance forecast accuracy rather than using an early-display advantage. They can even give up their early-display advantage if they are faced with increased market uncertainty and small market power. Compared with the fixed purchase cost, the time-sensitive purchase cost can stimulate the merchant to purchase in advance, but this can decrease the merchant's profit. Consequently, risk-averse merchants always display their merchandise later, decrease the order quantity, and, finally, miss the market opportunity.