Advance Selling to Ease Financial Distress

• 成果类型: Article
• 署名作者: Papanastasiou, Yiangos; Xiao, Shuang; Yang, S. Alex
• 署名单位: Rice University; Zhongnan University of Economics & Law; University of London; London Business School
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.03904
• 发表日期: 2025
• 关键词: OM-finance interface; social operations management; advance selling; Strategic Consumers; moral hazard

摘要

Left unable to provide service during the COVID-19 pandemic, many small businesses have experimented with alternative ways of generating income. One approach that has gained traction is the use of advance selling, whereby the firm asks consumers in its local community to support the business by paying in advance for consumption at a future date. In this paper, we develop a game theoretic model to investigate whether and how advance selling schemes can be successfully implemented by firms facing financial distress. In cases of high distress (i.e., where obtaining bank financing is infeasible given the firm's financial need), we show that advance selling in its classic implementation can help the firm secure its survival in some scenarios but may suffer from significant inefficiencies associated with strategic consumer behavior and firm moral hazard. We demonstrate that two modifications of the classic scheme currently observed in practice-namely, (i) the introduction of an all-or-nothing clause and (ii) selling future discount coupons as opposed to the full service-can expand the set of scenarios in which survival is ensured while also allowing the firm to extract higher profit. In cases of moderate financial distress (i.e., where bank financing is a feasible but inefficient option), we find that simple advance selling schemes typically fail to make an impact. However, we show that a more complex scheme, combining both of the aforementioned modifications simultaneously, can be used in conjunction with bank financing to generate a substantial improvement in firm profit.