University of Pennsylvania ScholarlyCommons Operations, Information and Decisions Papers Wharton Faculty Research 6-2009 The Consumer's Rent vs. Buy Decision in the Rentailer George Knox Jehoshua Eliashberg University of Pennsylvania Follow this and additional works at: https://repository.upenn.edu/oid_papers Part of the Marketing Commons, Organizational Behavior and Theory Commons, and the Social Statistics Commons Recommended Citation Knox, G., & Eliashberg, J. (2009). The Consumer's Rent vs. Buy Decision in the Rentailer. International Journal of Research in Marketing, 26 (2), 125-135. http://dx.doi.org/10.1016/j.ijresmar.2008.12.004 This paper is posted at ScholarlyCommons. https://repository.upenn.edu/oid_papers/43 For more information, please contact
[email protected]. The Consumer's Rent vs. Buy Decision in the Rentailer Abstract In this paper, we focus on the perspective and business model of the rentailer — a retail outlet that rents and sells new and used home video titles. This requires predicting the consumer's decision to rent or buy a particular title, segmenting its customer base, and pricing new and used titles. We develop a new model based on a simple heuristic found in the behavioral marketing literature of how people predict their own usage of a service. We estimate the model using a unique panel dataset obtained from a large rentailer, and find it provides a good fit to the data. Using the model estimates we obtain a metric indicating a latent customer tendency to buy at full price (compared to buying at a lower price or renting). Other diagnostic information from the model may help convert renters into buyers.