CORE Brown Bag - Matteo Bulgarelli

Matteo Bulgarelli (CORE)

will give a presentation on :

Leasing, Bundling and Aggregate Output: Are Rental Subscriptions Sustainable?

Abstract : 

We study the potential of rental subscriptions as a tool to abate the production impact. We build an oligopoly model where two single-product retailers and a multi-product rental provider compete on prices: products in our model are horizontally differentiated, while leasing is qualitatively inferior to owning an item. The rental provider, or Access Based Service Provider (ABSP) offers a bundle of two products, and its user base receives one product per period. We compare the equilibrium outcomes with a setup where the multi-product firm sells the two products, rather than renting them out. We show that leasing is greener than selling for goods characterized by small unit cost: moreover, a marginal improvement on the ability of the ABSP to serve multiple consumers with the same item does not necessarily result in a lower production impact, due to the strategic response of the competitors. Finally, we find that as leasing and selling become closer substitutes, leasing is more likely to result in higher production impact, in that the cost savings implied by better asset utilisation translate into a very large user base for the multi-product firm.

  Matteo Bulgarelli