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Revenue‐Sharing Contracts under Demand Uncertainty in Shopping Center

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  • Aika Monden
  • Katsuyoshi Takashima
  • Yusuke Zennyo

Abstract

This article investigates shopping center rent contracts that have a two‐part tariff structure: charging a fixed rent plus a percentage of sales. We consider a game‐theoretic model, wherein a shopping center developer offers different contracts for two types of retailers: large and small. The retailers face demand uncertainties. We show the developer offers a lower percentage fee for the large retailer. Alternatively, it offers a higher fixed fee for the large retailer, unless the small retailer faces largely uncertain demand. The developer's expected profit increases with the demand uncertainty, which would suggest the developer should assemble nearly homogeneous retailers.

Suggested Citation

  • Aika Monden & Katsuyoshi Takashima & Yusuke Zennyo, 2021. "Revenue‐Sharing Contracts under Demand Uncertainty in Shopping Center," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 556-573, June.
    • Handle: RePEc:bla:reesec:v:49:y:2021:i:2:p:556-573
    DOI: 10.1111/1540-6229.12263
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    References listed on IDEAS

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    Cited by:

    1. Hermansson, Cecilia & Lundgren, Berndt, 2022. "What factors matter in rent negotiations? Differences in views between landlords and retail trade tenants," Working Paper Series 22/9, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.

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