IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v7y1998i3p435-460.html
   My bibliography  Save this article

Seller Financing of Consumer Durables

Author

Listed:
  • Arijit Sen

Abstract

Sellers of consumer durables often provide financing to customers. This paper shows that when customers desire consumption smoothing and when financial markets are imperfect, a seller can find it optimal to offer a menu of deferred-payment plans. A monopolist seller price discriminates among customers with different intertemporal income profiles by making such menu offers, and the interest rate on the seller credit can be significantly lower than the market borrowing rate. Seller financing can be an equilibrium outcome in a game where sellers and banks with market power choose payment plans and interest rates strategically. Copyright (c) 1998 Massachusetts Institute of Technology.

Suggested Citation

  • Arijit Sen, 1998. "Seller Financing of Consumer Durables," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 435-460, September.
  • Handle: RePEc:bla:jemstr:v:7:y:1998:i:3:p:435-460
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=jems&volume=7&issue=3&year=1998&part=null
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stein, Jeremy C., 1988. "Takeover Threats and Managerial Myopia," Scholarly Articles 3708937, Harvard University Department of Economics.
    2. Jensen, Michael C. & Ruback, Richard S., 1990. "Preface," Journal of Financial Economics, Elsevier, pages 1-3.
    3. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    4. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
    5. Judd, Kenneth L, 1987. "The Welfare Cost of Factor Taxation in a Perfect-Foresight Model," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 675-709, August.
    6. Grossman, Sanford J. & Hart, Oliver D., 1988. "One share-one vote and the market for corporate control," Journal of Financial Economics, Elsevier, pages 175-202.
    7. Ma, Ching-to & Moore, John & Turnbull, Stephen, 1988. "Stopping agents from "cheating"," Journal of Economic Theory, Elsevier, pages 355-372.
    8. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, pages 123-139.
    9. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, pages 452-458.
    10. Robert Gibbons & Kevin J. Murphy, 1990. "Relative Performance Evaluation for Chief Executive Officers," ILR Review, Cornell University, ILR School, pages 30.
    11. Rudolf Kerschbamer, 1997. "Information Revelation via Takeovers in Correlated Environments," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 55-60.
    12. Jean-Jacques Laffont & Jean Tirole, 1988. "Repeated Auctions of Incentive Contracts, Investment, and Bidding Parity with an Application to Takeovers," RAND Journal of Economics, The RAND Corporation, pages 516-537.
    13. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110-110.
    14. Oliver D. Hart, 1988. "Capital Structure as a Control Mechanism in Corporations," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 467-476, August.
    15. Jean-Jacques Laffont & Jean Tirole, 1988. "Repeated Auctions of Incentive Contracts, Investment, and Bidding Parity with an Application to Takeovers," RAND Journal of Economics, The RAND Corporation, pages 516-537.
    16. Sanford J. Grossman & Oliver D. Hart, 1987. "One Share/One Vote and The Market for Corporate Control," Working papers 440, Massachusetts Institute of Technology (MIT), Department of Economics.
    17. Demski, Joel S. & Sappington, David, 1984. "Optimal incentive contracts with multiple agents," Journal of Economic Theory, Elsevier, pages 152-171.
    18. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351-351.
    19. Warner, Jerold B. & Watts, Ross L. & Wruck, Karen H., 1988. "Stock prices and top management changes," Journal of Financial Economics, Elsevier, pages 461-492.
    20. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, pages 293-315.
    21. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    22. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1989. "Alternative Mechanisms for Corporate Control," American Economic Review, American Economic Association, pages 842-852.
    23. Robin Marris, 1963. "A Model of the "Managerial" Enterprise," The Quarterly Journal of Economics, Oxford University Press, pages 185-209.
    24. Kerschbamer Rudolf, 1994. "Destroying the Pretending Equilibria in the Demski-Sappington-Spiller Model," Journal of Economic Theory, Elsevier, pages 230-237.
    25. Jarrell, Gregg A. & Poulsen, Annette B., 1987. "Shark repellents and stock prices : The effects of antitakeover amendments since 1980," Journal of Financial Economics, Elsevier, pages 127-168.
    26. Eckbo, B Espen & Wier, Peggy, 1985. "Antimerger Policy under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 119-149, April.
    27. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
    28. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
    29. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, pages 225-264.
    30. Caves, Richard E., 1989. "Mergers, takeovers, and economic efficiency : Foresight vs. hindsight," International Journal of Industrial Organization, Elsevier, pages 151-174.
    31. David Scharfstein, 1988. "The Disciplinary Role of Takeovers," Review of Economic Studies, Oxford University Press, vol. 55(2), pages 185-199.
    32. Bebchuk, Lucian Arye, 1989. "Takeover Bids below the Expected Value of Minority Shares," Journal of Financial and Quantitative Analysis, Cambridge University Press, pages 171-184.
    33. Dilip Mookherjee, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 433-446.
    34. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, pages 203-235.
    35. Jarrell, Gregg A & Brickley, James A & Netter, Jeffry M, 1988. "The Market for Corporate Control: The Empirical Evidence Since 1980," Journal of Economic Perspectives, American Economic Association, pages 49-68.
    36. Palepu, Krishna G., 1986. "Predicting takeover targets : A methodological and empirical analysis," Journal of Accounting and Economics, Elsevier, pages 3-35.
    37. Jensen, Michael C, 1988. "Takeovers: Their Causes and Consequences," Journal of Economic Perspectives, American Economic Association, pages 21-48.
    38. Caillaud Bernard & Jullien Bruno & Picard Pierre, 1991. "Competing vertical structures : precommitment and renegotiation," CEPREMAP Working Papers (Couverture Orange) 9125, CEPREMAP.
    39. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, pages 927-940.
    40. Coughlan, Anne T. & Schmidt, Ronald M., 1985. "Executive compensation, management turnover, and firm performance : An empirical investigation," Journal of Accounting and Economics, Elsevier, pages 43-66.
    41. Bebchuk, Lucian Arye, 1989. "Takeover Bids below the Expected Value of Minority Shares," Journal of Financial and Quantitative Analysis, Cambridge University Press, pages 171-184.
    42. Caillaud, Bernard & Jullien, B & Picard, P, 1995. "Competing Vertical Structures: Precommitment and Renegotiation," Econometrica, Econometric Society, pages 621-646.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, pages 198-233.
    2. Charupat, Narat & Prisman, Eliezer Z., 2004. "An essay on financial innovation: The case of instalment receipts," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 129-156, January.
    3. Pejman Abedifar & Shahid M. Ebrahim & Philip Molyneux & Amine Tarazi, 2015. "Islamic Banking And Finance: Recent Empirical Literature And Directions For Future Research," Journal of Economic Surveys, Wiley Blackwell, pages 637-670.
    4. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, pages 2197-2224.
    5. Zheng, Charles Z., 2001. "High Bids and Broke Winners," Journal of Economic Theory, Elsevier, pages 129-171.
    6. M. Shahid Ebrahim & Seema Makhdoomi & Mustapha Sheikh, 2012. "The Political Economy and the Perennial Underdevelopment of the Muslim World," Working Papers 12011, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:7:y:1998:i:3:p:435-460. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.