Online leasing problem with price fluctuations under the consumer price index

Abstract

Price fluctuation is a common phenomenon in the leasing industry. This paper studies the online leasing problem in which the lessee does not know how long he will use the required equipment. Besides, the price of the equipment varies over time, and cannot be learned in advance. We bound the price fluctuations by the definition of the consumer price index. That is, the ratio of the prices between any two consecutive times lies in a predetermined range. By assuming, the lessee has two options for acquiring the equipment: purchase or lease. The problem requires that the leasing strategy should be determined under uncertainties in the using period and the price fluctuations, such that the cost for using the equipment is minimized. We present an optimal online strategy for solving this problem. Computational experiments are conducted to evaluate the characteristics of the problem and the performance of the proposed strategy.