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Intertemporal Price Discrimination in Frictionless Durable Goods Monopolies

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  • Kuhn, Kai-Uwe

Abstract

The author shows that small differences in quality and production costs between durables and nondurables in a product line allow a durable goods monopolist to intertemporally price discriminate even with continuous trading. In particular, a monopolist would want to both sell and rent out a durable to achieve price discrimination. This incentive to price discriminate simultaneously creates inefficient delay in the sale of the durable good, a finite trading period, and long-run efficiency of the market. The Coase conjecture fails because the nondurable good acts as an outside option that guarantees a minimum profit in the market for durables. Copyright 1998 by Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 46 (1998)
Issue (Month): 1 (March)
Pages: 101-14

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Handle: RePEc:bla:jindec:v:46:y:1998:i:1:p:101-14

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Cited by:
  1. Kim, Jae-Cheol & Kim, Min-Young & Chun, Se-Hak, 2014. "Property tax and its effects on strategic behavior of leasing and selling for a durable-goods monopolist," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 132-144.
  2. Goering, Gregory E., 2007. "Durability choice with differentiated products," Research in Economics, Elsevier, vol. 61(2), pages 105-112, June.
  3. Tian Xia & Richard Sexton, 2010. "Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination," Review of Industrial Organization, Springer, vol. 36(4), pages 333-349, June.
  4. Eric Avenel & Sebastien Mitraille, 2004. "Strategic Delays of Delivery, Market Separation and Demand Discrimination," The Centre for Market and Public Organisation 04/112, Department of Economics, University of Bristol, UK.

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