ELIMINATING THE MARKET FOR SECONDHAND GOODS - AN ALTERNATIVE EXPLANATION FOR LEASING

There are a number of prominent specific instances in which a durable goods manufacturer with significant market power employed a lease-only policy: (i) United Shoe in the market for shoe machinery, (ii) IBM in the market for computers, and (iii) Xerox in the market for copiers. The obvious question that arises is, Why would such a firm prefer leas ing over selling? In this article I argue that one role of the lease-o nly policy was to eliminate the market for secondhand goods. The artic le formally demonstrates the argument, discusses the relationship betw een this article and earlier literature on secondhand markets, and dis cusses the implications for antitrust policy.