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Marketing Channels and the Durable Goods Monopolist: Renting versus Selling Reconsidered

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  • Purohit, Devavrat
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    Abstract

    Research on durable goods has shown that because of a time inconsistency problem, a monopolist manufacturer prefers to rent rather than sell its product. We reexamine the relative profitability of renting versus selling from a marketing perspective. In particular, using a simple linear demand formulation, we assume a durable goods monopolist has to use downstream intermediaries to market its product. In contrast to the case of an integrated monopolist, we find that when the monopolist has to rely on intermediaries, then it prefers to go through an intermediary that sells rather than one that rents its product. Similarly, the intermediary that sells the product is more profitable than the intermediary that rents the product. However, if the monopolist can commit to a set of prices, then the intermediary that rents is more profitable than the intermediary that sells. Copyright 1995 by MIT Press.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

    Volume (Year): 4 (1995)
    Issue (Month): 1 (Spring)
    Pages: 69-84

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    Handle: RePEc:bla:jemstr:v:4:y:1995:i:1:p:69-84

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    Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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    Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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    Cited by:
    1. Xiong, Yu & Yan, Wei & Fernandes, Kiran & Xiong, Zhong-Kai & Guo, Nian, 2012. "“Bricks vs. Clicks”: The impact of manufacturer encroachment with a dealer leasing and selling of durable goods," European Journal of Operational Research, Elsevier, vol. 217(1), pages 75-83.
    2. Preyas Desai & Oded Koenigsberg & Devavrat Purohit, 2001. "Coordinating Channels for Durable Goods: The Impact of Competing Secondary Markets," Review of Marketing Science Working Papers 1-1-1017, Berkeley Electronic Press.
    3. Gregory Goering & Michael Pippenger, 2003. "Dynamic consistency and monopoly," Atlantic Economic Journal, International Atlantic Economic Society, vol. 31(2), pages 188-194, June.
    4. Gregory E. Goering, 2012. "Taxation and Durable-Goods Monopoly: Does a Current Tax Influence Firm Behavior?," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 20-28, August.
    5. Goering, Gregory E., 2005. "Durable goods monopoly and quality choice," Research in Economics, Elsevier, vol. 59(1), pages 59-66, March.
    6. Gregory Goering & Michael Pippenger, 2002. "Durable Goods Monopoly and Forward Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(2), pages 271-282.

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