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Overselling in a Competitive Environment: Boon or Bane?

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  • Wei Shi Lim

    ()
    (NUS Business School, National University of Singapore, 117592 Singapore)

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    Abstract

    In this paper, we study the practice of overselling in a competitive environment where late-arriving consumers value the good higher than early-arriving ones but the former's arrival is uncertain. We show that overselling is a dominant strategy for the firms. However, it can lead to a prisoners' dilemma situation in which all firms are worse off overselling. We further show that only when demand from the late consumers far exceeds the supply and there is a sufficiently high profit margin from reselling does overselling result in a Pareto-dominant outcome for the firms.

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    File URL: http://dx.doi.org/10.1287/mksc.1090.0519
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 28 (2009)
    Issue (Month): 6 (11-12)
    Pages: 1129-1143

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    Handle: RePEc:inm:ormksc:v:28:y:2009:i:6:p:1129-1143

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    Related research

    Keywords: overselling; overbooking; pricing; revenue management; competition; capacity constraints;

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