Dynamic interaction between markets for leasing and selling automobiles

Andrikopoulos, Athanasios and Markellos, Raphael N. (2015) Dynamic interaction between markets for leasing and selling automobiles. Journal of Banking and Finance, 50. pp. 260-270. ISSN 0378-4266

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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.

Item Type: Article
Additional Information: This is an open access article licensed under CC BY 3.0
Uncontrolled Keywords: interacting markets,automobiles,differential games,leasing,valuation
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Pure Connector
Date Deposited: 20 Jan 2015 10:42
Last Modified: 21 Apr 2020 23:44
URI: https://ueaeprints.uea.ac.uk/id/eprint/51721
DOI: 10.1016/j.jbankfin.2014.01.032

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