A Game-Theory Analysis of Optimal Leasing and Selling Strategies of Durable Goods in Duopoly Markets

Abstract

In this paper, we analyze the strategic impact on the choice between leasing and selling in a duopoly market, a generalized model is developed based on the Cournot model, we not only consider the substitution relationship of two firms’ new products, but also take the competitiveness between new products and second-hand products into account, and we’ve discussed six cases respectively under different situations. The results show that if two firms simultaneously employ the same pure strategy, such as (leasing, leasing) or (selling, selling), pure selling strategy turns out to be better than pure leasing strategy. However, if one firm chooses pure selling strategy while the other chooses pure leasing strategy, leasing is the unique dominant behavior. In addition, if one firm’s choice is pure strategy, the other’s choice is a mix of leasing and selling strategy, pure strategy always dominates the mixed strategy except when the proportion of selling is sufficiently small.