The impact of the second-hand market on marketing strategies for goods with depreciation

Most goods have a mature second-hand market where consumers can buy or lease both new and used goods. However, a few goods are strictly controlled by manufacturers and have no second-hand market. Considering factors of depreciation and the second-hand market, should monopolistic manufacturers adopt the selling or leasing modes for these goods? To resolve this issue, we construct a two-period game-theoretic model. Two types of depreciation are considered: usage depreciation and individual depreciation. Usage depreciation is predicated on the notion that goods deteriorate in value over time owing to wear and tear. Individual depreciation posits that consumers perceive a decline in the attractiveness and freshness of goods, resulting in depreciated valuations. In scenarios where a second-hand market exists, the selling and leasing modes yield comparable benefits to manufacturers when both individual and usage depreciation remain below a specified threshold. However, once this threshold is surpassed, the leasing mode always dominates the selling mode. When no second-hand market exists and both individual and usage depreciation are below a certain threshold, the selling mode takes precedence over the leasing mode. Conversely, once the threshold is surpassed, the leasing mode dominates the selling mode. The leasing mode always dominates the selling mode for goods with only usage depreciation. For goods with individual depreciation, the leasing mode dominates the selling mode only when the magnitude of depreciation is low. When the degree of depreciation of goods is small, the second-hand market will increase the manufacturer’s profit under the selling mode. In addition, management implications are discussed.