Durable Products with Multiple Used Goods Markets: Product Upgrade and Retail Pricing Implications

Shuya Yin; Ray, Saibal; Gurnani, Haresh; Animesh, Animesh
May 2010
Marketing Science;May/Jun2010, Vol. 29 Issue 3, p540
Academic Journal
Used goods markets are currently important transaction channels for durable products. For some durable products, such markets first appeared when retailers started buying back used products from "old" customers and selling them to new ones for a profit (retail used goods market). The growth of electronic peer-to-peer (P2P) markets opened up a second, frictionless used goods channel where new customers can buy used products directly from old customers (P2P used goods market). Both these markets compete with the original primary market where retailers sell unused products procured from the manufacturer. This paper focuses on understanding the role that the sequential emergence of the above two used goods markets plays in shaping the product upgrade strategy of the manufacturer and the pricing strategy of the primary market retailer in the context of a decentralized, dyadic channel dealing with a renewable set of consumers. Our analysis establishes that frequent product upgrades and rising retail prices in durable product sectors of our interest are due to the emergence of the P2P used goods market and how the market interacts with the retail used goods source in altering the relative powers of the channel partners. Moreover, contrary to popular belief, we show that the initial introduction of the retail used goods channel actually discourages introduction of new versions and restrains the rise in retail prices. We also comment on how the two used goods markets affect the profits of the channel partners. We then provide empirical support for our theoretical result regarding product upgrades using data from the college textbook industry, a durable product that fits our model setup.


Related Articles

  • Social Learning and Dynamic Pricing of Durable Goods. Jing, Bing // Marketing Science;Sep/Oct2011, Vol. 30 Issue 5, p851 

    We analyze the impacts of social learning (SL) on the dynamic pricing and consumer adoption of durable goods in a two-period monopoly. Consumers can make either early, uninformed purchases or late but potentially informed purchases as a result of social learning. Several results are derived....

  • Dual distribution channels: The competition between rental agencies and dealers. Purohit, Devavrat // Marketing Science;1997, Vol. 16 Issue 3, p228 

    Managerial decisions involving marketing channels are among the most critical that an organization must make. Part of the reason for this importance is that relationships between manufacturers and their intermediaries usually involve long-term commitments that are difficult to change. On the...

  • Competition, Monopoly, and Aftermarkets. Carlton, Dennis W.; Waldman, Michael // Journal of Law, Economics & Organization;Apr2010, Vol. 26 Issue 1, p54 

    Consider a durable goods producer that has the option of monopolizing an aftermarket such as repair for its own product. An important question is whether such monopolization reduces welfare? We show that the answer to this question is frequently no. In particular, we explore three models that...

  • Implications of Channel Structure for Leasing or Selling Durable Goods. Bhaskaran, Sreekumar R.; Gilbert, Stephen M. // Marketing Science;Sep/Oct2009, Vol. 28 Issue 5, p918 

    In spite of the fact that many durable products are sold through dealers, the literature has largely ignored the issue of how product durability affects the interactions between a manufacturer and her dealers. We seek to fill this gap by considering a durable goods manufacturer that uses...

  • Good, Better, or Best? Wyner, Gordon A. // Marketing Management;Nov/Dec2005, Vol. 14 Issue 6, p8 

    The article focuses on the challenges of setting the right goals for marketing. In the article, marketing is defined as being about "generating profitable revenue through brands that enable customer acquisition and management." Achieving these goals involves the setting of more specific goals,...

  • MARKETING CONCEPT FOR DURABLE GOODS SALES MANAGEMENT. KAPUSTINA, LARISA; ZHURAVLEVA, ALEXANDRA // International Journal of Management Cases;Sep2011, Vol. 13 Issue 3, p227 

    This article addresses the implication of the marketing concept for sales management in the durable goods market based on a case study of "Stroykomplex" Ltd., which specializes in fireplace retail and wholesale. It illustrates the application of a logical concept of the «Six Ws» by...

  • In The Eye Of The Beholder.  // NZ Marketing Magazine;Aug2008, Vol. 27 Issue 7, p30 

    The article focuses on plumbing-supplies manufacturer Methven, winner of the 2008 Consumer Durables Award in New Zealand. Its flagship Methven Satinjet shower range is recognised as world-class, having won international awards for its design and environmentally friendly and patented technology....

  • Relicensing as a Secondary Market Strategy. Oraiopoulos, Nektarios; Ferguson, Mark E.; Beril Toktay, L. // Management Science;May2012, Vol. 58 Issue 5, p1022 

    Secondary markets in the information technology industry, where used or refurbished equipment is traded, have been growing steadily. For original equipment manufacturers (OEMs) in this industry, the importance of secondary markets has grown in parallel, not only as a source of revenue, but also...

  • Aftermarkets, systems, and antitrust: a primer. Gundlach, Gregory T. // Antitrust Bulletin;Spring2007, Vol. 52 Issue 1, p17 

    This article discusses the concepts underlying aftermarkets, especially its relation to systems and antitrusts. It discusses definitions of aftermarkets in relation to systems competition, and how both are relevant to antitrust. It stresses the importance of studying the antitrust aspects of...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics