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Durable-Good Monopoly and Best-Price Provisions

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  • Butz, David A
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    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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    Bibliographic 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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    Cited by:
    1. Jong-Hee Hahn, 2006. "Damaged Durable Goods," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 121-133, Spring.
    2. Saracho de la Torre, Ana Isabel & Casado Izaga, Francisco Javier, 1999. "Choice of Product Variety for the Durable Goods Monopolist," BILTOKI 1999-02, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
    3. Usategui Díaz de Otalora, José María, 2001. "Commitment Power in a Non-Stationary Durable-Good Market," BILTOKI 2001-08, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
    4. Andrew F. Daughety & Jennifer F. Reinganum, 2002. "Exploiting Future Settlements: A Signalling Model of Most-Favored-Nation Clauses In Settlement Bargaining," Vanderbilt University Department of Economics Working Papers 0221, Vanderbilt University Department of Economics, revised Oct 2002.
    5. 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.
    6. Jong-Hee Hahn, 2005. "Durable Goods Monopoly and Product Quality," Keele Economics Research Papers KERP 2005/12, Centre for Economic Research, Keele University.
    7. Usategui Díaz de Otalora, José María, 2006. "Non-Stationary Demand in a Durable Goods Monopoly," DFAEII Working Papers 2006-05, University of the Basque Country - Department of Foundations of Economic Analysis II.
    8. Morita, Hodaka & Waldman, Michael, 2006. "Competition, Monopoly Maintenance, and Consumer Switching Costs," MPRA Paper 1426, University Library of Munich, Germany.

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