Leasing or selling? The channel choice of durable goods manufacturer considering consumers’ capital constraint

In this paper, we explore how a monopoly manufacturer chooses the market strategies and decides the optimal price to obtain maximum profit. We divide the market into the C-type market and the N-type market, and analyze the profitability of the monopoly manufacturer who takes the pure-selling, pure-leasing and hybrid strategy respectively, considering consumers’ capital constraint and the life span of the durable goods in an indefinite time horizon model. (1) We find that a larger proportion of the consumers with capital constraint has a more significant impact on the prices and it could slow down the development of the rental market. When the scale of the group attains up to a threshold level, it would greatly influence the customers’ demand and their marketing strategy, and encourages more manufacturers to take the leasing strategy. (2) In the Hybrid Strategy, we see explicit growth in the overall profit with both the leasing channel and the selling channel working together, although the former outperforms the latter. The suppressed selling channel, in fact, has to lower the price to keep the market coverage, with an independent market structure. (3) Finally, we find that a leasing agent may help the manufacturer at first and then become a tough competitor. These findings provide new insights for the operation of large construction machinery manufacturing companies. subject classification numbers as needed.