Reallocation in Perishable Goods Markets

Abstract

How does the ability to reallocate affect perishable goods markets? I study how the effects on consumers and a monopolist seller vary depending on whether resale or refund contracts are used to reallocate and whether the setting features demand uncertainty or price discrimination.In Chapter 2, I study the performance of popular reallocation mechanisms in the market for college football tickets, which features several sources of uncertainty. I show that the performance of each mechanism depends on the properties of demand uncertainty and build a model in which consumers anticipate shocks, make advance purchase decisions, and reallocate after shocks are realized. By capturing the effects of different types of shocks, the model is able to predict the relative performance of the mechanisms. I find that refund contracts produce higher profit and total welfare than resale because of fees and frictions associated with resale.In Chapter 3, I use a theory model with advance purchases and a rich set of idiosyncratic demand shocks to compare the performance of resale and refunds. For profit, the relative performance depends on the degree of aggregate uncertainty, and the seller can completely insulate itself against aggregate uncertainty by owning the resale market and selling to brokers. Aggregate uncertainty enhances the performance of resale because resale prices adjust to reflect shocks while the monopolist seller's prices do not. For welfare, both the seller and a monopolist resale market operator have an incentive to impede frictionless resale, and either can maximize welfare.In Chapter 4, I consider how the ability to resell affects a monopolist's incentive to bundle. Using a model in which consumers have heterogeneous preferences over two goods and a cost of participating in a resale market, I show that the monopolist may choose to bundle even if some consumers resell. The coexistence of price discrimination and resale is novel in settings where resale harms the seller, and I show that it significantly affects the monopolist's pricing problem.