The diffusion of technological innovations in low and middle-income countries has been facilitated by the use of Rent-To-Own (RTO) business models, which give flexibility to consumers by allowing them to make incremental payments over time. Motivated by an application of RTO to the distribution of solar lamps in low and middle-income countries, we examine the drivers and impact of payment flexibility on repayment performance and consumer behavior in RTO contracts. We formulate a stochastic dynamic programming model that characterizes an important dimension of payment flexibility, i.e., the ability of consumers to make bundled payments (multiple installments paid at once, in advance). We characterize when and why bundled payments are more likely to occur. We examine different flexibility levers that the firm can adjust as part of its contract design (repayment frequency/installment amount, grace period), accounting for the impact of bundled payments. Our results show that an intermediate level of flexibility could benefit both the firm and consumers under some conditions. Our findings indicate that a moderate level of flexibility can go a long way in helping firms and consumers in these environments. Hence, RTO firms may not need to offer extreme degrees of flexibility in order to achieve desirable outcomes.

This paper explores how regulatory ambiguity—a distinct yet related concept to uncertainty—plays a crucial and understudied role in shaping entrepreneurial entry into regulated markets. Unlike uncertainty, which can be reduced by acquiring more information, ambiguity arises from the presence of multiple, conflicting interpretations of existing information and may persist or even increase with additional data. Our study proposes that regulatory ambiguity increases with imprecise regulatory language, creating cracks in the rigid regulatory environment that allow entrepreneurs to actively experiment. To explore this, we leverage regulatory ambiguity in state policies regarding geothermal energy definitions between 1960 and 1990. Using a synthetic control method, our results show that ambiguity increases market entry, with effects largely driven by de novo entrants. Further analyses suggest that increased ambiguity leads to greater use of advanced technologies among market entrants. This study stresses the importance of accounting for ambiguity when examining how organizations respond to complex institutional environments.

This study examines how U.S. power sector firms respond to environmental regulation violations, focusing on facilities flagged by the EPA for non-compliance. In response, these plants implement various strategies to reduce air pollution and prevent future violations, including cutting electricity generation, improving fuel quality, reducing coal use, installing scrubbers, enhancing pollution controls, and investing in energy-efficient generators. Organizational efficiencies and government subsidies further strengthen these efforts. While these actions aid environmental recovery, the costs of compliance are often passed on to local communities through higher electricity prices, raising concerns about social equity. Following a violation, firms generally experience increases in assets, capital expenditures, debt, revenues, and electricity prices, yet operating income remains unaffected. Our findings highlight that while market competition and government subsidies can help alleviate some of the financial burden on consumers, these subsidies often fall short of promoting the long-term investments in advanced technologies necessary for sustained environmental progress.