Nature of Competition: Basics of Rental Market

There are two broad categories of “the market.” The one is to trade the title of the product or the asset. The second category is the market for rental right of space or creative powers. Herein we are interested in the second. We call the right holder the renter and the title holder the lender. 

What to rent. First, we need space whatever we are to do; residing, staying, idling, leisuring, travelling, consuming, creating, trading and the like. Second, we need the human power, also mistakenly called “labor” (L), in the process of creation. Third, we in creation additionally need physical powers out of “physical capital” (K) or “land” (N). Again, we with “creation” (Y for GDP per annum, for instance) mean production of goods and services (C for consumption) and construction of new assets (I for investment). 

             While the powers are running for the renter, needless to say, the assets are owned by the respective investor-owner-lender. For instance, I as owner of the human asset rely on the creative power in running for a job defined by the employer, for and only for contracted hours of the day, the week, the year and cetera. Therefore, what is to lend and rent is not the asset, or “production factor” as called in economics, per se but the power-hour. 

The rental rates. The rental market is for the right to use the creative power of the underlying asset over a certain period of time. The unit of trade is the hour of utilization mostly of a lumpy object. In general, the rental metric is a monetary sum ("income") per rented site-hour,  person-hour, machine-hour or  acre-hour. Notably, hired, employed and rented are synonyms as regards the power which is ready to run. Apparently, there is the time dimension in the rental rate as opposed to the price of product or asset.  

The term of contract. In theory and sometimes in practice, powers are rented hourly or even minute-wise. Mostly in practice however, the rental contract, explicit or implicit, stipulate a certain period of validity. The term contract is generally beneficial to both parties particularly in terms of saving transaction costs. Typically, the term of contract is the fortnight for wage earners, the year for salary earners and some years for space rentals. 

The time of trade. The contract is legally binding up to the terminal day. In this sense, every contract is the unit of trade even if many contracts can possibly be cookie-cutters. At any rate, trade in contracts is more or less seasonal and even cyclical. For instance, the salary contract is made at the ending month of the previous year or in the beginning month of the current year. Contracts for residential facilities are concentrated in the “moving season” almost by definition. 

The folly of “fixed supply. Some economists claim that the supply in the housing market, for instance, be fixed. Alas, they miss the point that the stock might be fixed but the supply for trade can never be. While we are in Here (up to 125 years), no housing can be "supplied" until the house stands with a signboard saying “for rent.” No economics is for the heavens, either.

             In the same vein, the quantity of Mona Lisa is fixed but it is of no supply until it is on the block. Incidentally, “money is of no use until we get rid of it.” When any of us is interested in either, he may refer to Paul Samuelson and William Nordhaus, Economics.

Roberta Flack - Killing Me Softly With His Song