The value of secondary markets when consumers are socially conscious

This study examines the effect of a secondary market with socially conscious consumers on a brand firm’s profitability. The existing literature on the introduction of a secondary market usually assumes a channel setting. In practice, however, brand firms begin introducing physical products to secondary markets with a consumer-to-consumer setting, which is not considered in existing theories. Therefore, we develop a two-period pricing model to investigate the effect of secondary markets with socially conscious consumers and conduct a sensitivity analysis to examine the impact of the main parameters on the equilibrium outcomes. Conventional wisdom suggests that the introduction of the consumer-to-consumer secondary market is always detrimental to suppliers of durable physical goods. However, we demonstrate that a brand firm may benefit from introducing the physical product secondary market if the consumers are socially conscious under certain conditions, which stands in contrast to the existing literature. Moreover, consumers always prefer the introduction of a secondary market; that is, a “win–win” outcome may be achieved. In summary, our findings provide useful implications regarding when managers should introduce a secondary market in case consumers are socially conscious.