Most companies fear cannibalization—the risk that letting customers resell their products will eat into profits. After all, if buyers can pass along a cheaper “used” version, who would still pay full price? That logic holds for cars, books, or video games—physical goods that can be resold. But a new study by Professor Ying-Ju Chen of HKUST Business School finds that in the world of digital goods, resale can actually help companies make money and manage demand more effectively.

Unlike physical goods, digital products behave differently: copies don’t wear out, usage can be tracked, and access can be controlled through licenses or apps. This opens the door for companies to design contracts that manage resale instead of fighting it. For example, China Mobile Hong Kong’s “sharing pricing” plan lets subscribers resell unused mobile data, while Livedrive in the UK allows users to share or resell their cloud storage space.

The research examines what happens when sellers of digital goods allow customers to resell unused portions to others.

Using a game-theoretic model, Prof. Chen simulated how both sellers and customers behave under different pricing designs. The model assumes customers have varying levels of demand (“high-use” versus “low-use”) and shows how each group responds to a given contract—whether it’s a simple flat plan or one that allows trading unused quotas.

The analysis compares three types of contracts:

• Bucket plans, which charge one flat price for a fixed usage allowance;
• Nonlinear (two-part) tariffs, which combine a base fee and pay-per-use charges; and
• Sharing contracts, where customers can freely resell any unused allowance to others.

The results were striking: the seller’s best strategy is to encourage reselling, not restrict it. When users can trade freely, resale produces the same outcome as the optimal two-part tariff—identical revenue, market coverage, and customer satisfaction. Peer-to-peer sharing thus becomes a built-in form of price discrimination: heavy users pay more by buying extra data or storage from light users, who recover part of their costs.

The study challenges the long-held belief that resale inevitably causes cannibalization. In digital markets—where usage can be monitored and controlled—resale can instead enable smarter, more flexible pricing. By turning sharing into strategy, companies can transform what once seemed a threat into a win-win marketplace for both providers and consumers.