Optimal pricing and financing strategies for leased equipment considering maintenance and lessees’ options

Yanping Liu, Biyu Liu and Haidong Yang

International Journal of Production Economics, 2024, vol. 269, issue C

Abstract: Periodic payment for leased equipment may lead to capital constraint for lessors. In view of preventive maintenance (PM) strategy and lessees' options, the impact of different financing modes on lessor's pricing decision-making for leased equipment is studied. By considering the impact of age and usage on PM strategy and lessees' revenue, and lessees-different options to return, renew or purchase leased equipment after the lease expires, a game-theoretic model with respect to advance payment, bank loan and mixed financing modes is presented. The lessor's optimal pricing and financing strategies, as well as lessees' options are obtained by using non-cooperative game, cooperative game and transfer-payment contract. The results show: (1) with the increase of bargaining level, the periodic rental price decreases; Under non-cooperative game, lessees renew the equipment first and then purchase it, while under cooperative game lessees always renew the lease. The lessor can motivate lessees to participate in cooperation through appropriate transfer-payment contract; (2) as the advance payment discount increases, the lessor shifts from advance payment to bank loan financing mode under non-cooperative game, while always adopts a financing mode including advance payment under cooperative game. Both leasing parties accept the advance payment financing mode only when the advance payment discount is within a certain range; (3) the increased usage of leased equipment brings larger PM and corrective maintenance (CM) burden to the lessor, which affects lessees' options and both leasing parties' profits. The lessor shall measure the PM and CM costs of leased equipment to maximize the profit.

Keywords: Pricing and financing; Lessees' options; Leasing; Preventive maintenance; Game-theoretic (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:269:y:2024:i:c:s0925527324000148

DOI: 10.1016/j.ijpe.2024.109157

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