Understanding Opaque Selling from an Inventory-control Perspective

We take a mainly inventory-control angle in our attempt to understand the roles played by opaque selling. While facing demands for two closely-related products, the seller in our model can also use price discounts and more guaranteed availabilities to entice buyers into accepting probabilistically assigned actual deliveries. Our study involving such opaque selling first takes aggregate buyer behaviors as given. Here, the seller's provable preference for more balanced inventory levels would in turn lead to both a very reasonable balance-inducing rationing policy and the seller's welcome of more opaque selling. Different from existing works with similar purposes, we allow the seller's replenishment policy to tolerate occasional lost sales. It would be better able to extract operational efficiencies in absolute terms and rationalize opaque selling by comparison. Also considered is a more realistic but also more complex case where the choices of a continuum of buyers with heterogeneous valuations and the fulfillment rates of the lone seller are reached as equilibrium points of a game-theoretic model. The seller's decisions on the price discount and replenishment policy are discussed as well. Further managerial insights are gained from our numerical analyses