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According to practitioners, retail stores located in “golden” real-estates (i.e., in good locations) greatly outperform other stores in terms of profits. Therefore, how to keep a long-term leasing contract with golden real-estate owners is very important to retail stores. To achieve this goal, this research proposes a leasing contract which is bonus-based with contract-termination option. The bonus-based idea denotes that the tenant shares the profit with the landlord in order to keep a long-term contract. That is, the landlord shall receive y=a∙m+b∙P, where m is the current market price of rent fee, 0≤a≤1 is a decision variable, P is the yearly profit of tenant, and 0≤b≤1 is also a decision variable. The idea of contract-termination option denotes that the landlord can yearly determine whether to terminate the contract or not while the contract has proceeded over Ts years. While decreasing a and b, the renting expense of the tenant becomes lower yet counterbalanced by a lower probability of signing contracts. The longer is Ts, the more is the benefit to the tenant yet counterbalanced by inducing a lower probability of signing the contract. As a result, (a, b, Ts) are decision variables in terms of maximizing the total profit of the tenant. This research assumes a one-to-many scenario; that is, there is only one tenant which is a large-scale chain retailer and there are many landlords of golden real-estates; and the tenant intends to design a contract that shall maximize its total expected profit. Making assumptions on the decision-making behaviors of the tenant and the landlords, this research develop a mathematical model maximize the expected profit of the tenant by finding an optimum leasing alternative (a, b, Ts).
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