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Durable Good Monopolies with Rational Expectations and Replacement Sales

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Author Info
Eric W. Bond
Larry Samuelson

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Abstract

A monopoly producer of a durable good is examined under the (previously uninvoked) assumption that the good depreciates, and hence that replacement sales must occur if a fixed stock of the good is to be maintained. We find two ways in which the no-depreciation result, that the monopoly will always (at least eventually) produce a stock equal to that produced by a competitive market, may not hold. If the length of the trading period is nonzero, the limiting stock produced by the firm will be lower than the competitive stock, to ensure the profitability of future replacement sales. If the firm is able to constrain its production capacity, it may choose a constraint that always binds in the sense that it will be impossible for the firm to achieve a stock equal to the competitive stock.

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File URL: http://links.jstor.org/sici?sici=0741-6261%28198423%2915%3A3%3C336%3ADGMWRE%3E2.0.CO%3B2-X&origin=repec
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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 15 (1984)
Issue (Month): 3 (Autumn)
Pages: 336-345
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Handle: RePEc:rje:randje:v:15:y:1984:i:autumn:p:336-345

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  1. Preyas Desai & Oded Koenigsberg & Devavrat Purohit, 2001. "Coordinating Channels for Durable Goods: The Impact of Competing Secondary Markets," Review of Marketing Science Working Papers 1-1-1017, Berkeley Electronic Press. [Downloadable!]
  2. Bruce W Hamilton & Mary Burke, 1996. "The Coase Conjecture in Continuous Time: Imperfect Durability Endogenous Durability and Aftermarkets," Economics Working Paper Archive 362, The Johns Hopkins University,Department of Economics. [Downloadable!]
  3. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. V. Brian Viard, 2007. "Information Goods Upgrades: Theory and Evidence," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 7(1). [Downloadable!]
  5. Robert H. Porter & Peter Sattler, 1999. "Patterns of Trade in the Market for Used Durables: Theory and Evidence," NBER Working Papers 7149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Macauley, Molly & Hamilton, Bruce, 1998. "Competition and Car Longevity," Discussion Papers dp-98-20, Resources For the Future. [Downloadable!]
  7. Tarek Coury & Vladimir P. Petkov, 2007. "Delegation and Commitment in Durable Goods Monopolies," Economics Series Working Papers 336, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  8. Lawrence Ausubel & Raymond Deneckere, 1985. "One is Almost Enough for Monopoly," Discussion Papers 669, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. Pasquale Schiraldi, 2006. "Second-Hand Markets and Collusion by Manufacturers of Semidurable Goods," Boston University - Department of Economics - Working Papers Series WP2006-028, Boston University - Department of Economics. [Downloadable!]
  10. Jong-Hee Hahn, 2005. "Durable Goods Monopoly and Product Quality," Keele Economics Research Papers KERP 2005/12, Centre for Economic Research, Keele University. [Downloadable!]
  11. Carlos Osório & Paulo Maçãs & João Leitão, 2002. "A Determinação do Preço dos Bens Duráveis em Duopólio," Microeconomics 0202004, EconWPA. [Downloadable!]
    Other versions:
  12. Gea M Lee, 2003. "Upgrading, Degrading, and Intertemporal Price Discrimination," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  13. David Butz, 1988. "Durable Good Monopoly and Best-Price Provisions," UCLA Economics Working Papers 472, UCLA Department of Economics. [Downloadable!]
  14. Evrim Dener, 2007. "Quality Uncertainty and Time Inconsistency in a Durable Good Market," Departmental Working Papers 0707, Southern Methodist University, Department of Economics. [Downloadable!]
  15. In-Koo Cho, 2007. "Perishable Durable Goods," Economics Working Papers 0077, Institute for Advanced Study, School of Social Science. [Downloadable!]
  16. Jong-Hee Hahn, 2004. "Durable Goods Monopoly with Endogenous Quality," Econometric Society 2004 Far Eastern Meetings 665, Econometric Society. [Downloadable!]
  17. Jae-Cheol Kim, 1992. "DURABLE GOOD MONOPOLY, FINITE DURABILITY AND 'TRIGGER’ TIME-CONSISTENT EQUILIBRIUM," International Economic Journal, Korean International Economic Association, vol. 6(2), pages 69-77, June. [Downloadable!] (restricted)
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