Overselling in a Competitive Environment: Boon or Bane?
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.
Volume (Year): 28 (2009)
Issue (Month): 6 (11-12)
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