Rental price and rental duration under retail competition

Tang, C S and Deo, S (2008) Rental price and rental duration under retail competition. European Journal of Operational Research, 187 (3). pp. 806-828. ISSN 1872-6860

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Consider a retailer that rents products to customers for a pre-specified rental duration. By considering the dynamics of uncertain rental demand and return processes, we first present a base model that is intended to analyze the impact of rental duration on the stocking level, the rental price, and the retailer’s profit. Due to the complexity of the base model, we develop an approximation scheme to obtain tractable results. Also, we apply the base model to analyze a situation in which a retailer enters a revenue sharing agreement with a distributor. Moreover, we expand our base model to address the issue of competition in rental duration and rental price. The analysis of our competitive model in a duopolistic environment suggests that the market equilibrium depends on the market potential and the rental duration sensitivity. Furthermore, we establish conditions under which one firm will charge a lower rental price while the other firm will offer a longer rental duration in equilibrium.

Item Type: Article
Additional Information: The research article was published by the author with the affiliation of UCLA Anderson School of Management.
Subjects: Marketing
Date Deposited: 16 Jun 2015 12:02
Last Modified: 10 Jul 2023 11:06

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