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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)

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.

Suggested Citation

  • Wei Shi Lim, 2009. "Overselling in a Competitive Environment: Boon or Bane?," Marketing Science, INFORMS, vol. 28(6), pages 1129-1143, 11-12.
  • Handle: RePEc:inm:ormksc:v:28:y:2009:i:6:p:1129-1143
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    File URL: http://dx.doi.org/10.1287/mksc.1090.0519
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    References listed on IDEAS

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    Cited by:

    1. Li, Tingting & Xie, Jinxing & Lu, Shengmin & Tang, Jiafu, 2016. "Duopoly game of callable products in airline revenue management," European Journal of Operational Research, Elsevier, vol. 254(3), pages 925-934.
    2. Georgiadis, George & Tang, Christopher S., 2014. "Optimal reservation policies and market segmentation," International Journal of Production Economics, Elsevier, vol. 154(C), pages 81-99.
    3. Chua, Geoffrey A. & Lim, Wei Shi & Yeo, Wee Meng, 2016. "Market structure and the value of overselling under stochastic demands," European Journal of Operational Research, Elsevier, vol. 252(3), pages 900-909.

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