Who is going to get the tradeup money? RW or the exchanger? I can guess? How long will the trade down exchanger tolerate that.
1,000,000 customers, where did you get that. They only have a handfull in New England. Less than Ebay.
I believe the trade up money will be used by Redweek to purchase inventory and reinject weeks into the system. Redweek profits through the exchange fees. If they pocket the trade up profit, then they will deplete the exchange inventory which will weaken the system.
Here's an example that may help illustrate this point.
Let's say that 1000 people deposit weeks worth exactly 2000 RW points each. The total value of those deposits would be 2,000,000 RW Points.
RW would grant each of those 1000 owners 2000 points. So, outstanding exchange credits equals 2,000,000 RW points.
Assuming that RW does a PERFECT job at assigning point values (which is highly debatable), then at the start of the system, there is no exchange imbalance since deposits = exchange credits. 2M points of inventory. 2M points of exchange credits.
Now, let's say that 1000 people do a search first exchange for those 1000 deposited weeks. But, their weeks are only worth 1000 RW points each. They will each owe RW $1000 each because they are taking out a 2000 point week and only depositing a 1000 point week.
In this scenario, RW collects $125,000 in exchange fees ($125 * 1000 exchanges). And, they collect $1,000,000 in trade up fees.
Now, let's look at the exchange balance sheet. After these 1000 exchanges, the exchange system has 1000 weeks in it worth 1000 points each. So, there are 1M RW points worth of inventory. But, there are still 1000 depositers who have 2M RW points worth of credit. So, there is an exchange imbalance of 1M RW points.
2M RW points chasing 1M RW points of inventory. That is called inflation.
The way that RW can address this is by taking the $1M in trade up fees and acquire 1M RW points of inventory and reinjecting it into the system. If they are smart about it, they can get great wholesale prices for weeks and not have to pay $1M for 1M worth of points. Or, they could cheat by buying $500k of inventory and assigning it 1M RW points in value.
So, there is a lot of trust being placed in RW to assigned point values according to the real market price. It would be very very easy to cheat.
Also, remember, timeshare intervals are perishable products. If 10% of weeks expire without being exchanged, then the exchange base is depleted. Redweek either needs to buy weeks to put into the system at a very effective rate, get developers to deposit free weeks or they need to over assign points and put them into the system. Either way, the exchangers are placing their trust into the central bank of Redweek who assigns point values and manages the system.
The system works when it hits critical mass and it's customers trust that it isn't cheating.
I believe that publishing daily statistics on key exchange statistics would be important to building trust with depositers.
Make no bones about it. Redweek is creating a currency. Their success or failure will be due in large part to their ability to manage these exchange balances.