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Full-Text Articles in Social and Behavioral Sciences
Return, Purchase, Or Skip? Outcome, Duration, And Consumer Behavior In The Rent-To-Own Market, Michael H. Anderson, Sanjiv Jaggia
Return, Purchase, Or Skip? Outcome, Duration, And Consumer Behavior In The Rent-To-Own Market, Michael H. Anderson, Sanjiv Jaggia
Economics
Rent-to-own (RTO) is attractive to financially distressed consumers. It allows immediate access to merchandise and an opportunity for eventually acquisition. Yet goods can be returned at any point without penalty or other adverse consequences. We use a competing risk methodology that accounts for unobserved consumer heterogeneity to study how contracts conclude, estimating the probabilities of exit— via return, purchase, or skip—and the associated durations. The estimated outcome probabilities highlight the use of the embedded return option by RTO consumers and the trade-offs and cross-subsidization implicit in the RTO contractual arrangement.We offer rational and behavioral explanations of consumer behavior in the …
Rent-To-Own Agreements: Customer Characteristics And Contract Outcomes, Michael H. Anderson, Sanjiv Jaggia
Rent-To-Own Agreements: Customer Characteristics And Contract Outcomes, Michael H. Anderson, Sanjiv Jaggia
Economics
The rent-to-own (RTO) industry, by offering immediate access to household goods for a small periodic fee with no credit check or down payment, has strong appeal to low income and financially distressed consumers. An important policy question is whether an RTO agreement is used as a rental/lease with build-in purchase option or as something more akin to an installment loan. Given the embedded options to return the item or to purchase it early, the actual rent paid by RTO customers is substantially lower than the oft-reported total rent which assumes that agreements go to term. We employ a log-normal censored …