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Publication year
When Do Secondary Markets Harm Firms?
Resource type
Authors/contributors
- Chen, Jiawei (Author)
- Esteban, Susanna (Author)
- Shum, Matthew (Author)
Title
When Do Secondary Markets Harm Firms?
Abstract
To investigate whether secondary markets aid or harm durable goodsmanufacturers, we build a dynamic model of durable goods oligopolywith transaction costs in the secondary market. Calibrating modelparameters using data from the US automobile industry, we find thenet effect of opening the secondary market is to decrease new carmanufacturers' profits by 35 percent. Counterfactual scenarios inwhich the size of the used good stock decreases, such as when productsbecome less durable, when the number of firms decreases, or whenfirms can commit to future production levels, increase the profitabilityof opening the secondary market.
Publication
American Economic Review
Volume
103
Issue
7
Pages
2911-34
Date
2013-12
Citation
Chen, J., Esteban, S., & Shum, M. (2013). When Do Secondary Markets Harm Firms? American Economic Review, 103, 2911–2934.
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