Abstract

http://ssrn.com/abstract=2359803
 
 

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Cannibalization and Option Value Effects of Secondary Markets: Evidence from the US Concert Industry


Victor Bennett


Duke University - Fuqua School of Business; University of Southern California - Marshall School of Business

Robert Seamans


New York University (NYU) - Leonard N. Stern School of Business

Feng Zhu


Harvard University - Harvard Business School

April 1, 2014

Forthcoming, Strategic Management Journal

Abstract:     
We examine how reducing search frictions in secondary markets affects the value appropriated by firms in primary markets. We characterize two effects on primary market firms caused by intermediaries entering secondary markets: the ‘cannibalization’ and ‘option value’ effects. Separation between primary and secondary markets can drive which of the two effects dominates. Firms selling valuable and scarce products are more likely to have separate primary and secondary markets, and will therefore appropriate more value when secondary markets thicken. Firms selling products which are not valuable and scarce will be hurt. Further, we hypothesize that firms have incentives to engineer scarcity by limiting supply when secondary markets thicken to separate primary and secondary markets. We find support for these hypotheses in the U.S. concert ticket industry.

Number of Pages in PDF File: 16

Keywords: Secondary Markets, Prices, Search Intermediaries, Value Appropriation, Concert Industry

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Date posted: November 26, 2013 ; Last revised: August 30, 2014

Suggested Citation

Bennett, Victor and Seamans, Robert and Zhu, Feng, Cannibalization and Option Value Effects of Secondary Markets: Evidence from the US Concert Industry (April 1, 2014). Forthcoming, Strategic Management Journal. Available at SSRN: http://ssrn.com/abstract=2359803 or http://dx.doi.org/10.2139/ssrn.2359803

Contact Information

Victor Bennett (Contact Author)
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
Robert Seamans
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
Feng Zhu
Harvard University - Harvard Business School ( email )
Soldiers Field Road
Morgan 431
Boston, MA 02163
United States
HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938
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