When the apartment rental market cools down, the apartment owners think of reducing the rental prices either directly or indirectly to stimulate the demand. Direct reduction is simply reducing the annual rent. One of the indirect reduction strategies is keeping the rent constant but not charging any the rent for the first month of a 12-month lease (also called free first-month).

Among these two strategies, which one keeps the reference price higher? Explain. Is it in the interest of the apartment owners to keep the reference price higher?