Management Science and Engineering Department's Lecture

Theme：Selling to Conspicuous Consumers with a Scalper in the Market

Speaker：Dr. Lu Jizhou (Central University of Finance and Economics)

Time：2019-12-11 12:00

Address：Room 1008, Mingde Business Building

Language：English/Chinese

Abstract：  

This paper studies a monopolist firm selling products with adjustable capacity. The firm decides the pricing strategy and rationing policy at the beginning of the selling season. A scalper may enter the market purely with the intention of reselling and decide how many products to sell and the reselling price. Conspicuous consumers---that is, those who show a stronger purchase desire when the product is difficult to obtain---must choose to purchase from the firm or from the scalper.

With a deterministic model, we analyze the optimal prices and quantities decisions of the firm and the scalper and the profits of each. There are three major findings. First, the scalper will join the market whenever the firm introduces scarcity, even if there are no uncertainties in the market.

Second, the firm and the scalper can both benefit from customers' conspicuous consumption. Third, the scalper's speculative behavior may generate incentives for the firm to decrease the supply of products on purpose, which will increase the profits of both the firm and the scalper. The scalper's existence will also increase consumers' surplus when their level of consumption conspicuousness is rather high. We also explore an extension that highlights the robustness of our results.

Short biography：

Dr. Lu is an assistant professor in Department of Supply Chain and Operations Management in Central University of Finance and Economics. He achieves his PhD degrees from City University of Hong Kong and Xi’an Jiaotong University separately. His research interests are information quality and supply chain management, Behavior-OM interface.