Damaged durable goods
AbstractA durable-goods monopolist may use quality degradation as a commitment not to lower price in the future. The introduction of damaged goods expedites low-valuation consumersâ future demands, and helps the firm to mitigate the Coasian time-consistency problem. In such a case, damaged goods are more likely to be observed relative to the static setting where only the price-discrimination aspect of quality degradation is in effect. However, it is more likely to reduce welfare by inducing low- valuation buyers to buy the low-quality good early rather than to wait and buy the high-quality good later. So, quality degradation of durable goods is more likely to occur but less promising to the society, relative to the case of non-durable goods where damaged goods are rarely observed but more likely to be Pareto-improving.
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Volume (Year): 37 (2006)
Issue (Month): 1 (03)
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Other versions of this item:
- Jong-Hee Hahn, 2002. "Damaged Durable Goods," Keele Economics Research Papers, Centre for Economic Research, Keele University KERP 2002/21, Centre for Economic Research, Keele University.
- Hahn, Jong-Hee, 2003. "Damaged Durable Goods," Royal Economic Society Annual Conference 2003, Royal Economic Society 98, Royal Economic Society.
- Jong-Hee Hahn, 2002. "Damaged Durable Goods," Industrial Organization, EconWPA 0211010, EconWPA.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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