Problem Definition: A growing number of businesses are being built around a model that provides consumers access to a service up to a specified amount (an allowance). Examples include cloud-based data storage, mobile phone plans, fractional ownership of vacation homes, jets, and boats, among others. In most cases, the firm providing the access offers consumers a menu of prices and usage allowances to chose from. The realized usage of consumers is often uncertain with some consumers experiencing a need for usage that is below their allowance while others experiencing a need for usage that exceeds their allowance. This offers an opportunity for a marketplace to emerge, in which consumers trade unused capacity among each other. We study the effect of such a marketplace on service providers, consumers, and social welfare. Academic/Practical Relevance: As more firms adopt an allowance-based business model, there are more opportunities for peer-to-peer trading marketplaces to emerge. However, there is a debate on whether or not peer-to-peer trading of excess capacity is beneficial to service providers and consumers. Our paper sheds light on this debate and identifies conditions under which the existence of such marketplaces can be a win-win situation for all parties. Methodology: We develop a game-theoretic model in which consumers participate in a simultaneous coordination game. Consumers are strategic and take into account the opportunity of purchasing or selling extra capacity on the trading market. Our model captures the heterogeneity of consumers’ demand and the service provider’s ability to modify service plans in view of this trading among consumers. Results: We compare equilibrium outcomes with and without trading and show that outcomes with regard to service provider profit, consumer surplus, and social welfare are crucially dependent on service cost and trading price. A service provider would benefit from trading as long as the trading price is not too low (a low trading price encourages more consumers to opt for the low plan) and the service cost is not too high (a high service cost makes increased consumption due to trading too costly). A trading price that is too low can decrease consumer surplus and social welfare. Hence, a social planner would be interested in inducing a moderate or high trading price. In settings where the service provider is able to modify prices, consumers are no longer guaranteed to benefit from trading. In this case, trading can hurt consumers if the trading price is either sufficiently high (resulting in consumers paying a higher price for the higher plan) or sufficiently low (resulting in less consumption because more consumers opt for the low plan). Managerial Implications: Our results provide guidance to service providers, consumers, and policymakers as to when peer-to-peer trading may or may not be beneficial. The results highlight the important interplay between trading price and cost of service in determining various outcomes. For policymakers, the results can be useful in pointing out when such trading improves outcomes for consumers or social welfare and to potential policy levers that could be deployed to affect outcomes.