Comment on “Is Leasing Greener Than Selling?” and Remark on the Focal Point Analysis in Durable Goods Models

Mahdi Mahmoudzadeh ()
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Mahdi Mahmoudzadeh: University of Auckland Business School, Auckland 1010, New Zealand

Management Science, 2023, vol. 69, issue 9, 5691-5693

Abstract: The focal point analysis is a viable approach to analyze models of finitely durable goods in infinite time horizon. Agrawal, Ferguson, Toktay, and Thomas [Agrawal VV, Ferguson M, Toktay LB, Thomas VM (2012) Is leasing greener than selling? Management Sci. 58(3):523–533.] study the focal point of steady-state firm–consumer games for leasing and selling models. We note that the optimal solution for their selling model does not reflect self-replicated leases mirroring the lease offered by the firm and show that the solution is indeed erroneous as it violates the constraint on consumer-type cutoffs. Although this does not affect the structure of their propositions, that is, outlining thresholds for more profitability and greenness of selling compared with leasing, it renders the thresholds incorrect. We first uncover and fix the root cause of the error. We then distinguish the focal point analysis from the rental price approach and note a few remarks for future durable goods models.

Keywords: durable goods; focal point analysis; business models; sustainable operations (search for similar items in EconPapers)
Date: 2023
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