Pricing Considering Quality: A Strategy Analysis of Payment Forms

ABSTRACT We analyze three business models for electric vehicle power battery use: (1) pure selling strategy, (2) pure leasing strategy, and (3) innovative hybrid strategy where both the selling and leasing services are provided by one monopoly firm simultaneously. The firm decides the power battery quality. We demonstrate that the relative profitability of the monopoly firm's different strategies hinges on the customer's psychological cost and the leasing product's supply–demand ratio. Counterintuitively, for the monopoly firm, when product quality is endogenous, the hybrid strategy is not always more profitable than the pure selling strategy, which differs from the previous studies.