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No Lease is Short Enough to Solve the Time Inconsistency Problem

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  • DeGraba, Patrick

Abstract

The author provides a model of endogenous lease duration determination in the context of the durable goods monopolist problem. He shows that infinitely many leases (per finite unit of time) are required to solve completely the time inconsistency problem, thus suggesting that leasing may not provide a practical solution. The author also provides a warning regarding the results that can be derived by exogenously setting lease durations equal to 'one period' by resolving a paradoxical result in the literature. Copyright 1994 by Blackwell Publishing Ltd.

Suggested Citation

  • DeGraba, Patrick, 1994. "No Lease is Short Enough to Solve the Time Inconsistency Problem," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 361-374, December.
    • Handle: RePEc:bla:jindec:v:42:y:1994:i:4:p:361-74
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    Cited by:

    1. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series 1306, CESifo.
    2. Sue H. Mialon, 2014. "Product Bundling And Incentives For Mergers And Strategic Alliances," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 562-575, April.
    3. Ang, James S. & Jung, Min-Je, 1998. "Explicit versus implicit contracting in the debt market: The case of leasing," International Review of Financial Analysis, Elsevier, vol. 7(2), pages 153-169.
    4. Yacheng Sun & Shibo Li & Baohong Sun, 2015. "An Empirical Analysis of Consumer Purchase Decisions Under Bucket-Based Price Discrimination," Marketing Science, INFORMS, vol. 34(5), pages 646-668, September.
    5. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    6. Waldman, Michael, 1997. "Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 61-92, April.
    7. Preyas Desai & Devavrat Purohit, 1998. "Leasing and Selling: Optimal Marketing Strategies for a Durable Goods Firm," Management Science, INFORMS, vol. 44(11-Part-2), pages 19-34, November.

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