Overselling in a Competitive Environment: Boon or Bane?

Wei Shi Lim ()
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Wei Shi Lim: NUS Business School, National University of Singapore, 117592 Singapore

Marketing Science, 2009, vol. 28, issue 6, 1129-1143

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.

Keywords: overselling; overbooking; pricing; revenue management; competition; capacity constraints (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:28:y:2009:i:6:p:1129-1143

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