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.
| Original language | English |
|---|---|
| Pages (from-to) | 260-270 |
| Number of pages | 11 |
| Journal | Journal of Banking and Finance |
| Volume | 50 |
| Early online date | 26 Mar 2014 |
| DOIs | |
| Publication status | Published - Jan 2015 |
Keywords
- Interacting markets
- Automobiles
- Differential Games
- Leasing
- Valuation
Profiles
-
Raphael Markellos
- Norwich Business School - Professor of Finance
- Centre for Competition Policy - Member
- Finance Group - Member
Person: Research Group Member, Research Centre Member, Academic, Teaching & Research