Abstract:

The manufacturer provides leasing companies with technical upgrading of leasing equipment （or “old for new”） in the leasing supply chain to promote the application of new technologies. The decision-maker of the leasing company needs to decide whether to update the equipment for obtaining higher rental income. An online model is developed to analyze optimal online replacement strategy of leasing equipment in different market situation. Our results show that the new technology equipment unit lease period income， renewal cost and the old equipment unit lease period income affect the leasing equipment replacement. The optimal online replacement policy of the leasing company is： if the unit lease period income of the new equipment provided by the manufacturer is less than the update cost， the leasing company will continue to lease the old equipment without updating the equipment until the unit lease period income of the new technology provided by the manufacturer is not less than the update cost； Then continue to lease the old equipment until the difference between the lease income of the new equipment and the old equipment almost reaches the renewal cost. The insights obtained from our analysis offer useful guidelines for the leasing companies that will decide the next strategy under uncertainty.

Key words: leasing equipment replacement, online algorithm, competitive ratio