Research Snapshots

Opaque selling can pay

Probabilistic or opaque selling is a sales strategy where a seller hides the exact identity of a product until after the buyer makes a payment. Writing in Marketing Science, Dr Yimin Yu of the Department of Management Sciences and his co-author, ask why this strategy is attractive. The existing theory attributes it to price discrimination and demandsupply mismatch. Consumers typically do not know a firm's product offering strategy, or therefore the likelihood of a product being received. However "Decoder" websites do allow consumers to share experience through anecdotal reasoning. Dr Yu and his colleague build a model which advances the existing theory that opaque selling is not attractive. They find that opaque selling can indeed be optimal when consumers are boundedly rational, softening price competition, and increasing industry profits.

Read more:
Huang, Tingliang, and Yimin Yu. "Sell Probabilistic Goods? A Behavioral Explanation for Opaque Selling." Marketing Science 33.5 (2014): 743-759.