A generalized model of partial resale

Authors:
Ruhai Wu;Xianjun Geng;Andrew B. Whinston
Affiliations:
DeGroote School of Business, McMaster University, Canada;School of Management, The University of Texas at Dallas, United States;McCombs School of Business, The University of Texas at Austin, United States
Venue:
Decision Support Systems
Year:
2012

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Decision Support Systems - Special issue: Economics and information systems

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Abstract

Partial resale refers to the business scenario where some resale activities, yet not all, are feasible. A paper by Geng, Wu and Whinston [12] finds that a time-restricted resale market may benefit a ticket seller more than both unrestricted resale and no resale. This paper extends the study on profitable partial resale model in two directions with both theoretical and practical importance. First, we show that the existence of arbitrage, including scalping activities by scalpers, does not reduce the benefit of partial resale to the seller. Moreover, arbitrage may increase the benefit of partial resale to the seller. Second, we propose two structures of partial resale that differ from the one with time-restricted resale market. These two new structures lead to different firm pricing strategies and consumer behaviors, yet the eventual seller profits are the same across all three alternatives. This finding implies that the seller can have flexibility in choosing how to conduct partial resale without affecting its profitability.