Optimal Leasing and Selling Strategies of Durable Goods Manufacturer Considering Consumers’ Capital Constraint

Abstract

In this paper, we analyze the profitability of a monopoly manufacturer that takes pure-selling, pure-leasing and hybrid strategy by considering the capital constraint of the consumers and the life span of the product in an indefinite time horizon model. We find that the increase of the consumers with capital constraint has a more significant impact on the prices when the proportion of that group is small. It will curb the development of the rental market; when the group reaches a certain scale, then it plays a leading role in the demand, which encourages more manufacturers to take leasing strategy. In the hybrid strategy, we see an explicit increase in the overall profit. We find the leasing channel dominates the markets with the help of C-type market. The suppressed selling channel has to lower the price to keep the market coverage, which is independent with the market structure. These findings provide new insights for the operation of large construction machinery manufacturing companies.