Home > Publications . Search All . Browse All . Country . Browse PSC Pubs . PSC Report Series

PSC In The News

RSS Feed icon

Yang comments on importance of migrant remittances to future of recipient families

Bailey and Danziger's War on Poverty book reviewed in NY Review of Books

Bloomberg cites MTF data in story on CDC's anti-smoking ads for e-cigarettes

Highlights

Hicken wins 2015 UROP Outstanding Research Mentor Award

U-M ranked #1 in Sociology of Population by USN&WR's "Best Graduate Schools"

PAA 2015 Annual Meeting: Preliminary program and list of UM participants

ISR addition wins LEED Gold Certification

Next Brown Bag

Mon, April 6
Jinkook Lee, Wellbeing of the Elderly in East Asia

Sale or Lease? Durable-Goods Monopoly with Network Effects

Publication Abstract

Chien, Hung-Ken, and C. Y. Cyrus Chu. 2008. "Sale or Lease? Durable-Goods Monopoly with Network Effects." Marketing Science, 27(6): 1012-1019.

This paper studies the pricing problem of a durable-goods monopolist. It finds that contrary to the existing literature, profits from selling durable goods might be higher than from leasing when the products exhibit network effects. Under the influence of network effects, there exist multiple self-fulfilling equilibria that would sustain different network sizes at the same price. By using the assumption that consumers are cautious about network growth, we find that consumption externalities among heterogeneous groups of consumers generate a discontinuous demand function, which requires a lessor to offer a low price if she wants to reach the mass market. In contrast, a seller enjoys a relative advantage in that she can build a customer base by setting a lower initial price and raise the price later in the mass market. Our finding that selling can be more pro. table than leasing holds when consumers are more cautious about the prospect of the product's success, which might be the case if, for example, the technology or manufacturer is relatively unknown.

DOI:10.1287/mksc.1070.0356 (Full Text)

Browse | Search : All Pubs | Next