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Durable Goods Monopoly with Entry of New Consumers

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Author Info
Sobel, Joel

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Abstract

A dynamic monopolist produces at constant unit cost. Each period a new cohort of consumers enters the market. Each entering cohort is identical. Consumers within a cohort have different tastes. The paper shows that if players are sufficiently patient, any positive average profit less than the maximum feasible level can be attained in a subgame-perfect equilibrium; in stationary subgame-perfect equilibria, the seller cannot make sales at prices sufficiently greater than the lowest willingness-to-pay when period length goes to zero; and the seller attains the maximum commitment profit by charging the same (static monopoly) price in every period. Copyright 1991 by The Econometric Society.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 59 (1991)
Issue (Month): 5 (September)
Pages: 1455-85
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Handle: RePEc:ecm:emetrp:v:59:y:1991:i:5:p:1455-85

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  1. James J Anton & Gary Biglaiser, 2008. "Quality, Upgrades, and (the Loss of) Market Power in a Dynamic Monopoly Model," Levine's Working Paper Archive 122247000000002167, David K. Levine. [Downloadable!]
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  2. Vladimir A. Karamychev, 2000. "Cycles and Multiple Equilibria in the Market for Durable Lemons," Econometric Society World Congress 2000 Contributed Papers 0876, Econometric Society. [Downloadable!]
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  3. Schmidt, Klaus M. & Schnitzer, Monika, 2003. "Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market," CEPR Discussion Papers 3793, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September. [Downloadable!]
  5. Edward Kutsoati & Jan Zabojnik, 2001. "Durable Goods Monopoly, Learning-by-doing and "Sleeping Patents"," Discussion Papers Series, Department of Economics, Tufts University 0105, Department of Economics, Tufts University. [Downloadable!]
  6. Andrew Caplin & John Leahy, 1999. "Durable Goods Cycles," NBER Working Papers 6987, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Dirk Bergemann & Juuso Valimaki, 2004. "Monopoly Pricing of Experience Goods," Cowles Foundation Discussion Papers 1463R, Cowles Foundation, Yale University, revised May 2005. [Downloadable!]
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  9. Jong-Hee Hahn, 2005. "Durable Goods Monopoly and Product Quality," Keele Economics Research Papers KERP 2005/12, Centre for Economic Research, Keele University. [Downloadable!]
  10. Elizabeth Caucutt & Mrinal Ghosh & Christina Kelton, 1999. "Durability Versus Concentration as an Explanation for Price Inflexibility," Review of Industrial Organization, Springer, vol. 14(1), pages 27-50, February. [Downloadable!] (restricted)
  11. repec:bep:thecon:v:3:y:2003:i:1:p:1056-1056 is not listed on IDEAS
  12. Calvano, Emilio, 2006. "Destructive Creation," Working Paper Series in Economics and Finance 653, Stockholm School of Economics, revised 18 Jul 2007. [Downloadable!]
  13. Paulo MaƧãs Nunes, 2006. "The Coase problem: a transformation of the usual utility function," Applied Economics Letters, Taylor and Francis Journals, vol. 13(7), pages 427-429, June. [Downloadable!] (restricted)
  14. In-Koo Cho, 2007. "Perishable Durable Goods," Economics Working Papers 0077, Institute for Advanced Study, School of Social Science. [Downloadable!]
  15. Preston McAfee, 2003. "Capacity Choice Counters the Coase Conjecture," Theory workshop papers 505798000000000046, UCLA Department of Economics. [Downloadable!]
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