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Models for Lease and Maintenance Decisions

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Extended Warranties, Maintenance Service and Lease Contracts

Part of the book series: Springer Series in Reliability Engineering ((RELIABILITY))

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Abstract

There are two types of models for making lease decisions. The first type consists of models dealing with lease versus buy decisions and is based on cash flows taking into account the tax issues, discounting, etc. The second type consists of GT models involving the lessor(s) and the lessee(s) and possibly other parties (such as retailers, external service agents).

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Notes

  1. 1.

    The leasing of complex plants and infrastructures is more complicated as it involves many other parties depending on the lease. Figure 9.4 shows some the parties in the case of a leveraged lease.

  2. 2.

    The AHP is the creation of Thomas Saaty. For more details, see Saaty (1980).

  3. 3.

    For more details of the model formulation, see Vargas and Saaty (1981).

  4. 4.

    Grenadier (1995), Kim et al. (1978), Myers et al. (1976), Miller and Upton (1976) and Trigeorgis (1996) is a small illustrative sample. Model 10.3 is based on material from Trigeorgis (1996).

  5. 5.

    The products are durable goods as opposed to non-durable goods.

  6. 6.

    For more on this, see Stokey (1981) and Bulow (1982).

  7. 7.

    For more on this and relevant references, see Bhaskaran and Gilbert (2009).

  8. 8.

    This is done for a variety of reasons—(1) the need for deeper understanding of economics and marketing; (2) the models are very stylised (and unrealistic to some extent), and only some of the inferences are indirectly validated through real or test data; and (3) none deal with all the relevant issues. This is discussed further in Chap. 12. However, we do give relevant references where interested readers can get the details of model analysis and its implications.

  9. 9.

    The abbreviations used for customer type denote the following: B (buy new car), L (lease new car), H (hold onto car), X (buy ex-leased car), U (buy used car), I (inactive—do not buy car).

  10. 10.

    This model is the same as the rental agency model of Purohit (1995).

  11. 11.

    Asymmetric information can lead to adverse selection. Adverse selection under leasing is discussed in Hendel and Lizzeri (2002).

  12. 12.

    See Fudenberg and Tirole (1991).

  13. 13.

    See Maskin and Tirole (2001).

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Authors and Affiliations

  1. School of Mechanical and Mining Engineering, University of Queensland, Brisbane, Australia

    D. N. P. Murthy

  2. Dundee Business School, University of Abertay Dundee, Dundee, UK

    Nat Jack

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  1. D. N. P. Murthy
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Correspondence to D. N. P. Murthy .

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Murthy, D.N.P., Jack, N. (2014). Models for Lease and Maintenance Decisions. In: Extended Warranties, Maintenance Service and Lease Contracts. Springer Series in Reliability Engineering. Springer, London. https://doi.org/10.1007/978-1-4471-6440-1_10

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  • DOI: https://doi.org/10.1007/978-1-4471-6440-1_10

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