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Durable-Good Monopoly and Best-Price Provisions

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Author Info
Butz, David A
Abstract

Best-price provisions guarantee buyers that the prices they pay are the lowest available. If the seller subsequently cuts price, then each previous buyer is entitled to a refund. A durable-good monopolist who offers certain forms of these provisions can construct a consistent plan yielding the same profits as rental agreements and contracts with explicit quantity commitments. The provisions require special circumstances to be practical, but they are simple and effective and appear in a variety of economic settings. Three applications are discussed: international commodity agreements, markets for electric turbogenerators, and markets for financial claims. Copyright 1990 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 80 (1990)
Issue (Month): 5 (December)
Pages: 1062-76
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Handle: RePEc:aea:aecrev:v:80:y:1990:i:5:p:1062-76

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  1. Jose Maria Usategui, 2001. "Commitment Power in a Non-Stationary Durable-Good Market," BILTOKI 200108, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística). [Downloadable!]
  2. Leslie M. Marx & Greg Shaffer, 2004. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 796-801, June. [Downloadable!]
  3. Jong-Hee Hahn, 2005. "Durable Goods Monopoly and Product Quality," Keele Economics Research Papers KERP 2005/12, Centre for Economic Research, Keele University. [Downloadable!]
  4. José M. Usategui, 2006. "Non-Stationary Demand in a Durable Goods Monopoly," DFAEII Working Papers 200605, University of the Basque Country - Department of Foundations of Economic Analysis II, revised 11 Jan 2008. [Downloadable!]
  5. F. Javier Casado & Ana I. Saracho, 1999. "Choice of Product Variety for the Durable Goods Monopolist," BILTOKI 199902, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística). [Downloadable!]
  6. Jong-Hee Hahn, 2002. "Damaged Durable Goods," Keele Economics Research Papers KERP 2002/21, Centre for Economic Research, Keele University. [Downloadable!]
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  7. Morita, Hodaka & Waldman, Michael, 2006. "Competition, Monopoly Maintenance, and Consumer Switching Costs," MPRA Paper 1426, University Library of Munich, Germany. [Downloadable!]
  8. Andrew F. Daughety & Jennifer F. Reinganum, 2002. "Exploiting Future Settlements: A Signalling Model of Most-Favored-Nation Clauses In Settlement Bargaining," Working Papers 0221, Department of Economics, Vanderbilt University, revised Oct 2002. [Downloadable!]
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