This paper analyzes the problems associated with marketing durable goods through pure leases and pure sales in the perspective of asymmetric information. Academic research in this area has mainly dealt with the possibility of commitment in keeping price high in sales market, demand or marginal cost condition, threat of new entry, depreciation rate, etc.
I show that the relative profitability of leasing and selling can hinge on the existence of second-hand market and information asymmetry. In particular, I find some cases in that selling always dominates leasing with perfect information. In addition, I find that leasing tends to be more profitable as degree of information asymmetry increases.
