Overselling in a Competitive Environment: Boon or Bane?
Marketing Science · 2009 · Volume 28 · Issue 6
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
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