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Lost in Transaction

59 Pages Posted: 27 Oct 2016 Last revised: 30 Nov 2016

Hisayuki Yoshimoto

University of Glasgow - Adam Smith Business School

Jun Nakabayashi

Kindai University

Date Written: November 25, 2016

Abstract

A new style of durable goods consumption through a large scale online marketplace, characterized by a relatively light degree of usage and a short-term ownership, is becoming increasingly popular. By using a unique dataset of a quickly-circulating multi-use train ticket resale market, we analyze the welfare structure of such a rapidly-growing market sector. Our model manifests that a competitive resale market works as a conductor of transaction externalities, such as buyer-side search and seller-side resale costs. Individual-level welfare losses, which could be considered as a resale market dead-weight loss, are heterogeneous across buyers with differing degrees of intended use. These losses are disadvantageous to users who demand small degrees of usage as they are more likely to be excluded from trading opportunities. The estimation result shows that individual-level welfare losses are non-negligibly large, ranging from 3% to 21% of the new good price.

Keywords: Durable Goods Market, Search Cost, Resale Cost, Buyer-Seller Matching Frictions, Planned Temporary Ownership, Resale-Aimed Purchase

JEL Classification: L68, L81, L12

Suggested Citation

Yoshimoto, Hisayuki and Nakabayashi, Jun, Lost in Transaction (November 25, 2016). Available at SSRN: https://ssrn.com/abstract=2859558

Hisayuki Yoshimoto (Contact Author)

University of Glasgow - Adam Smith Business School ( email )

Glasgow
United Kingdom

HOME PAGE: http://hisayukiyoshimoto.org/

Jun Nakabayashi

Kindai University ( email )

Kowakae 3-4-1
Higashiosaka, Osaka 522-8502
Japan

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