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Timeshare Exchange Mechanisms

Author

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  • Yu Wang

    (Ross School of Business, University of Michigan, 701 Tappan Street, Ann Arbor, Michigan 48109)

  • Aradhna Krishna

    (Ross School of Business, University of Michigan, 701 Tappan Street, Ann Arbor, Michigan 48109)

Abstract

This paper focuses on the timeshare industry, where members own timeshare "weeks" and can exchange these weeks among themselves without a medium of exchange (such as money). Timeshare exchanges allow for the weeks to be redistributed among members to better match their preferences and thus increase efficiency. As such, the problem falls within the domain of matching problems, which have recently gained much attention in academia. We demonstrate theoretically that the two major timeshare exchange mechanisms used currently (deposit-first mechanism and request-first mechanism) can cause efficiency loss. We propose an alternate exchange mechanism, the top trading cycles chains and spacebank (TTCCS) mechanism, and show that it can increase the efficiency of the timeshare exchange market because TTCCS is Pareto efficient, individually rational, and strategyproof. We test the three exchange mechanisms in laboratory experiments where we simulate exchange markets with networked "timeshare members." The results of the experiments are robust across four different environments that we construct and strongly support our theory. The research focuses on an industry not studied earlier within academia and extends theoretical work on mechanism design to cases where supply of resources is dynamic, but resources can be stored.

Suggested Citation

  • Yu Wang & Aradhna Krishna, 2006. "Timeshare Exchange Mechanisms," Management Science, INFORMS, vol. 52(8), pages 1223-1237, August.
    • Handle: RePEc:inm:ormnsc:v:52:y:2006:i:8:p:1223-1237
    DOI: 10.1287/mnsc.1060.0513
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    Cited by:

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    2. Hua Chen & Sung H. Ham & Noah Lim, 2011. "Designing Multiperson Tournaments with Asymmetric Contestants: An Experimental Study," Management Science, INFORMS, vol. 57(5), pages 864-883, May.
    3. Yu Wang & Ernan Haruvy, 2013. "Tiers in One-Sided Matching Markets: Theory and Experimental Investigation," Management Science, INFORMS, vol. 59(6), pages 1458-1477, June.
    4. Subodha Kumar & Xiaowei Mei & Liangfei Qiu & Lai Wei, 2020. "Watching Ads for Free Mobile Data: A Game-Theoretic Analysis of Sponsored Data with Reward Task," Working Papers 20-08, NET Institute.
    5. Wilfred Amaldoss & Sanjay Jain, 2010. "Reference Groups and Product Line Decisions: An Experimental Investigation of Limited Editions and Product Proliferation," Management Science, INFORMS, vol. 56(4), pages 621-644, April.
    6. Tayfun Sönmez & M. Utku Ünver, 2009. "Matching, Allocation, and Exchange of Discrete Resources," Boston College Working Papers in Economics 717, Boston College Department of Economics.

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