Not Available for Download

Dynamic Interaction between Markets for Leasing and Selling Automobiles

Posted: 8 Jul 2012  

Thanos Andrikopoulos

Hull University Business School (HUBS)

Raphael N. Markellos

University of East Anglia (UEA) - Norwich Business School

Date Written: July 6, 2012

Abstract

We develop a model of dynamic interactions between price variations in leasing and selling markets for automobiles. Our framework assumes a differential game between multiple Bertrand-type competing firms which offer differentiated products to forward-looking agents. Empirical analysis of our model using monthly US data from 2002 to 2011 shows that variations in selling (cash) market prices lead rapidly dissipating changes of leasing market prices in the opposite direction. We discuss the practical implications of these results by augmenting a standard leasing valuation formula. The additional terms represent the leased asset value changes that can be expected on the basis of past variations in automobile selling market prices.

Keywords: Interacting markets, Automobiles, Differential Games, Leasing, Valuation

JEL Classification: D43, L62, E32, C73

Suggested Citation

Andrikopoulos, Thanos and Markellos, Raphael N., Dynamic Interaction between Markets for Leasing and Selling Automobiles (July 6, 2012). Available at SSRN: https://ssrn.com/abstract=2101707 or http://dx.doi.org/10.2139/ssrn.2101707

Thanos Andrikopoulos

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom
+44 (0) 1482 463310 (Phone)

HOME PAGE: http://www2.hull.ac.uk/hubs/about-us/our-staff/allstaff/a/andrikopoulos_a.aspx

Raphael N. Markellos (Contact Author)

University of East Anglia (UEA) - Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

Paper statistics

Abstract Views
2,496