The Leasing Option Premium

[DomainMart]

The option-to-buy component of a lease may be worth more than what an option pricing formula predicts. A recent study by Wolf et al. finds new evidence of an “endowment effect” in which the possession of an item increases the value a person places on it. They find that the longer people examined the item, the more they were prepared to pay for it.

In the standard demonstration of the endowment effect, a person’s value for an item increases once he or she owns it. One explanation of this effect is that ownership causes increased attachment to the item, which, in turn increases its subjective value.

Applying this principal to domain name leases suggests that there is an additional incentive for owners to lease their domain names. Moreover, this incentive underscores the imperative of including flexibility options in the domain name pricing.

Alex Tajirian

 

[actnow]

If the person/company leasing the domain uses it and promotes the domain,
it increases the potential market value.

So, naturally they will eventually buy the domain.

 

[DomainMart]

If the person/company leasing the domain uses it and promotes the domain,
it increases the potential market value.

So, naturally they will eventually buy the domain.

Hello actnow,

I am suggesting that there is an additional benefit, besides the value of the option-to-buy.