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Durable Goods Lease Contracts and Used-Goods Market Behavior: An Experimental Study

In: Experimental Business Research

Author

Listed:
  • Kay-Yut Chen

    (Hewlett-Packard Laboratories)

  • Suzhou Huang

    (Ford Motor Company)

Abstract

Leasing has become an increasingly prominent way for consumers to acquire durable goods such as automobiles. How markets respond to changes in lease contracts has enormous implications to producers such as Ford Motor Company. In this paper, an experimental model was developed to study the interaction between lease contracts that embed an option to purchase and an underlying used-goods market. Experiments with subjects playing roles of heterogeneous consumers have confirmed many salient features predicted by the theoretical model. These features include the segmentation of subjects into classes of behavior, and directional response to pricing in the used-good market to the provision in lease contracts.

Suggested Citation

  • Kay-Yut Chen & Suzhou Huang, 2005. "Durable Goods Lease Contracts and Used-Goods Market Behavior: An Experimental Study," Springer Books, in: Amnon Rapoport & Rami Zwick (ed.), Experimental Business Research, chapter 0, pages 1-19, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-24243-9_1
    DOI: 10.1007/0-387-24243-0_1
    as

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