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Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing

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Author Info

  • Waldman, Michael

Abstract

There are a number of prominent specific instances in which a durable goods manufacturer with significant market power employed a lease-only policy: United Shoe in the market for shoe machinery, (ii) IBM in the market for computers and (iii) Xerox in the market for copiers. The obvious question that arises is, Why would such a firm prefer leasing over selling? In this article the author argues that one role of the lease-only policy was to eliminate the market for secondhand goods. The article formally demonstrates the argument, discusses the relationship between this article and earlier literature on secondhand markets, and discusses the implications for antitrust policy. Copyright 1997 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 40 (1997)
Issue (Month): 1 (April)
Pages: 61-92

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Handle: RePEc:ucp:jlawec:v:40:y:1997:i:1:p:61-92

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Web page: http://www.journals.uchicago.edu/JLE/

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Cited by:
  1. Evrim Dener, 2011. "Quality uncertainty and time inconsistency in a durable good market," Journal of Economics, Springer, vol. 104(1), pages 1-24, September.
  2. Anders, Christoph, 2010. "Auswirkungen des Leasings auf Transaktionskosten," Leasing - Wissenschaft & Praxis, Universität zu Köln, Forschungsinstitut für Leasing, vol. 8(2), pages 71-88.
  3. Gavazza, Alessandro & Lizzeri, Alessandro & Rokestkiy, Nikita, 2012. "A quantitative analysis of the used-car market," MPRA Paper 38414, University Library of Munich, Germany.
  4. Evrim Dener, 2007. "Quality Uncertainty and Time Inconsistency in a Durable Good Market," Departmental Working Papers 0707, Southern Methodist University, Department of Economics.
  5. Chemmanur, Thomas & Jiao, Yawen & Yan, An, 2010. "A theory of contractual provisions in leasing," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 116-142, January.
  6. Dennis W. Carlton & Michael Waldman, 2001. "Competition, Monopoly, and Aftermarkets," NBER Working Papers 8086, National Bureau of Economic Research, Inc.
  7. Ari Gerstle & Michael Waldman, . "Mergers In Durable-Goods Industries: A Re-Examination Of Market Power And Welfare Effects," American Law & Economics Association Annual Meetings 1038, American Law & Economics Association.
  8. I. Hendel & A. Lizzeri, 1999. "The Role of Leasing under Adverse Selection," Princeton Economic Theory Papers 99f7, Economics Department, Princeton University.
  9. Jill Boylston Herndon, 2000. "United Shoe Machineryand the Antitrust Significance of “Free” Service," Review of Industrial Organization, Springer, vol. 17(3), pages 301-311, November.
  10. Hodaka Morita & Xuan Nguyen, 2012. "FDI and Technology Spillovers under Vertical Product Di erentiation," Discussion Papers 2012-19, School of Economics, The University of New South Wales.
  11. Robert H. Porter & Peter Sattler, 1999. "Patterns of Trade in the Market for Used Durables: Theory and Evidence," NBER Working Papers 7149, National Bureau of Economic Research, Inc.
  12. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, EconWPA.
  13. Andrea L. Eisfeldt & Adriano A. Rampini, 2009. "Leasing, Ability to Repossess, and Debt Capacity," Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1621-1657, April.
  14. Poddar, Sougata, 2004. "Strategic choice in durable goods market when firms move simultaneously," Research in Economics, Elsevier, vol. 58(2), pages 175-186, June.
  15. Miao, Chun-Hui, 2010. "Consumer myopia, standardization and aftermarket monopolization," European Economic Review, Elsevier, vol. 54(7), pages 931-946, October.

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