Revenue‐Sharing Contracts under Demand Uncertainty in Shopping Center

Aika Monden, Katsuyoshi Takashima and Yusuke Zennyo

Real Estate Economics, 2021, vol. 49, issue 2, 556-573

Abstract: This article investigates shopping center rent contracts that have a two‐part tariff structure: charging a fixed rent plus a percentage of sales. We consider a game‐theoretic model, wherein a shopping center developer offers different contracts for two types of retailers: large and small. The retailers face demand uncertainties. We show the developer offers a lower percentage fee for the large retailer. Alternatively, it offers a higher fixed fee for the large retailer, unless the small retailer faces largely uncertain demand. The developer's expected profit increases with the demand uncertainty, which would suggest the developer should assemble nearly homogeneous retailers.

Date: 2021
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https://doi.org/10.1111/1540-6229.12263

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