Timeshare Exchange Mechanisms

Management Science, August 2006

15 Pages Posted: 21 Jan 2015

See all articles by Yu Wang

Yu Wang

University of Texas at Dallas - Naveen Jindal School of Management

Aradhna Krishna

University of Michigan, Stephen M. Ross School of Business

Date Written: 2006

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 strategy-proof. We test the three exchange mechanisms in laboratory experiments where we stimulate 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

Wang, Yu and Krishna, Aradhna, Timeshare Exchange Mechanisms (2006). Management Science, August 2006, Available at SSRN: https://ssrn.com/abstract=2552228

Yu Wang

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Aradhna Krishna (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States