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

PSC In The News

RSS Feed icon

Clinton's and Trump's appeal to voters viewed from perspective of Neidert and Lesthaeghe's SDT framework

Stephenson assessing in-home HIV testing and counseling for male couples

Thompson says mass incarceration causes collapse of Detroit neighborhoods

Highlights

Maggie Levenstein named director of ISR's Inter-university Consortium for Political and Social Research

Arline Geronimus receives 2016 Harold R. Johnson Diversity Service Award

PSC spring 2016 newsletter: Kristin Seefeldt, Brady West, newly funded projects, ISR Runs for Bob, and more

AAUP reports on faculty compensation by category, affiliation, and academic rank

Next Brown Bag

PSC Brown Bags
will resume fall 2016

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