Dealership or Marketplace: A Dynamic Comparison

65 Pages Posted: 29 Oct 2019

See all articles by Ningyuan Chen

Ningyuan Chen

University of Toronto at Mississauga - Department of Management; University of Toronto - Rotman School of Management

Guillermo Gallego

Columbia University

Pin Gao

Department of Industrial Engineering and Decision Analytics, HKUST

Steven Kou

Boston University

Date Written: October 19, 2019

Abstract

We compare two common business models, dealership and marketplace, that bridge the demand and supply sides of two-sided markets. We show, in a dynamic setting, that the dealership model is more profitable if the demand side of the market is relatively small or the sellers are impatient. While the two models differ substantially in pricing power, inventory risk, fee structure, and waiting time, both models share fundamental similarities when the markets are thick: optimal revenues converge and there is a one-to-one mapping between their optimal policies.

Keywords: dynamic pricing, business models, dynamic game, Markov perfect equilibrium, structural properties

Suggested Citation

Chen, Ningyuan and Gallego, Guillermo and Gao, Pin and Kou, Steven, Dealership or Marketplace: A Dynamic Comparison (October 19, 2019). Available at SSRN: https://ssrn.com/abstract=3472161

Ningyuan Chen (Contact Author)

University of Toronto at Mississauga - Department of Management ( email )


Canada

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada

Guillermo Gallego

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Pin Gao

Department of Industrial Engineering and Decision Analytics, HKUST ( email )

Steven Kou

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
6173583318 (Phone)

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