IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Buying frenzies in durable-goods markets

  • Ting Liu

    ()

    (Department of Economics, Stony Brook University)

  • Pasquale Schiraldi

    (Department of Economics,London School of Economic)

We explain why a durable-goods monopolist would like to create a shortage during the launch phase of a new product. We argue that this incentive arises from the presence of a second-hand market and uncertainty about consumers?willingness to pay for the good. Consumers are heterogeneous in their valuations. Some consumers are initially uninformed about their valuations and learn about them over time while others are informed through their lifetimes. Given demand uncertainty, first period sales may result in misallocation and lead to active trading on secondary market after the uncertainty is resolved. We characterize conditions under which the monopolist would like to restrict sales and generate a buying frenzy. We show how the monopolist may benefit from an active second-hand market.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.stonybrook.edu/economics/research/papers/2012/secondhandmarket_8_5.pdf
File Function: First version, 2012
Download Restriction: no

Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 12-07.

as
in new window

Length:
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:nys:sunysb:12-07
Contact details of provider: Postal:
Stony Brook, NY 11794-4384

Phone: (631)632-7540
Fax: (631)632-7516
Web page: http://www.stonybrook.edu/commcms/economics/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Allen, Franklin & Faulhaber, Gerald R, 1991. "Rational Rationing," Economica, London School of Economics and Political Science, vol. 58(230), pages 189-98, May.
  2. Igal Hendel & Alessandro Lizzeri, 1999. "Interfering with Secondary Markets," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 1-21, Spring.
  3. Pascal Courty & Li Hao, 1997. "Sequential screening," Economics Working Papers 224, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 26(2), pages 445-469, 08.
  5. Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
  6. Pascal Courty & Javad Nasiry, 2016. "Product Launches and Buying Frenzies: A Dynamic Perspective," Production and Operations Management, Production and Operations Management Society, vol. 25(1), pages 143-152, 01.
  7. James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
  8. Swan, Peter L, 1980. "Alcoa: The Influence of Recycling on Monopoly Power," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 76-99, February.
  9. Simon P. Anderson & Victor Ginsburgh, 1994. "Price discrimination via second-hand markets," ULB Institutional Repository 2013/1719, ULB -- Universite Libre de Bruxelles.
  10. Vincenzo Denicolo' & Paolo Garella, 1999. "Rationing in a Durable Goods Monopoly," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 44-55, Spring.
  11. Pascal Courty, 2003. "Some Economics of Ticket Resale," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 85-97, Spring.
  12. Nocke, Volker & Peitz, Martin, 2008. "Advance-Purchase Discounts as a Price Discrimination Device," CEPR Discussion Papers 6664, C.E.P.R. Discussion Papers.
  13. Rapson, David & Schiraldi, Pasquale, 2013. "Internet and the efficiency of decentralized markets: Evidence from automobiles," Economics Letters, Elsevier, vol. 121(2), pages 232-235.
  14. Patrick DeGraba, 1995. "Buying Frenzies and Seller-Induced Excess Demand," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 331-342, Summer.
  15. Courty, Pascal, 2002. "Ticket Pricing Under Demand Uncertainty," CEPR Discussion Papers 3443, C.E.P.R. Discussion Papers.
  16. Pasquale Schiraldi & Francesco Nava, 2012. "Resale and Collusion in A Dynamic Market for Semidurable Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 274-298, 06.
  17. Ting Liu & Pasquale Schiraldi, 2012. "New product launch: herd seeking or herd preventing?," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 51(3), pages 627-648, November.
  18. Hideo Konishi & Michael Sandfort, 2000. "Existence of Stationary Equilibrium in the Markets for New and Used Durable Goods," Boston College Working Papers in Economics 450, Boston College Department of Economics.
  19. Waldman, Michael, 1997. "Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 61-92, April.
  20. Justin P. Johnson, 2011. "Secondary markets with changing preferences," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 555-574, 09.
  21. Rust, John, 1986. "When Is It Optimal to Kill Off the Market for Used Durable Goods?," Econometrica, Econometric Society, vol. 54(1), pages 65-86, January.
  22. Pasquale Schiraldi, 2008. "Automobile replacement: a dynamic structural approach," LSE Research Online Documents on Economics 21780, London School of Economics and Political Science, LSE Library.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nys:sunysb:12-07. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.