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Concurrent Renting and Selling in a Durable-Goods Monopoly under Threat of Entry

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  • Sam Bucovetsky
  • John Chilton

Abstract

This article analyzes the choice of contract (sales or rental) of a durable-goods monopolist facing a threat of future entry. Although in the absence of such a threat a monopolist would prefer to rent his entire output, we show that the threat of entry alters that preference. There is an optimal preentry contract mix, involving both rental and sales. If both firms behave as Cournot duopolists after entry, the optimal choice of preentry contracts enables the erstwhile monopolist to gain the same profits as he would if he behaved as a von Stackelberg leader.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 17 (1986)
Issue (Month): 2 (Summer)
Pages: 261-275

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Handle: RePEc:rje:randje:v:17:y:1986:i:summer:p:261-275

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Cited by:
  1. Saggi, Kamal & Vettas, Nikolaos, 1999. "Leasing versus Selling and Firm Efficiency in Oligopoly," Working Papers 99-07, Duke University, Department of Economics.
  2. Xiong, Yu & Yan, Wei & Fernandes, Kiran & Xiong, Zhong-Kai & Guo, Nian, 2012. "“Bricks vs. Clicks”: The impact of manufacturer encroachment with a dealer leasing and selling of durable goods," European Journal of Operational Research, Elsevier, vol. 217(1), pages 75-83.
  3. 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.
  4. 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.
  5. Andrikopoulos, Athanasios & Markellos, Raphael. N, 2012. "Dynamic interaction between markets for leasing and selling automobiles," MPRA Paper 45225, University Library of Munich, Germany.
  6. Gregory E. Goering, 2012. "Taxation and Durable-Goods Monopoly: Does a Current Tax Influence Firm Behavior?," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 20-28, August.
  7. Hoppe, Heidrun C. & Lee, In Ho, 2003. "Entry deterrence and innovation in durable-goods monopoly," European Economic Review, Elsevier, vol. 47(6), pages 1011-1036, December.
  8. Sagasta Elorza, Amagoia & Usategui Díaz de Otalora, José María, 2012. "Optimal overall emissions taxation in durable goods oligopoly," DFAEII Working Papers DFAEII;2012-18, University of the Basque Country - Department of Foundations of Economic Analysis II.
  9. Heidrun C. Hoppe & In Ho Lee, 2000. "Entry Deterrence in Durable-Goods Monopoly," Econometric Society World Congress 2000 Contributed Papers 0610, Econometric Society.
  10. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
  11. Li, Changying & Geng, Xiaoyan, 2008. "Licensing to a durable-good monopoly," Economic Modelling, Elsevier, vol. 25(5), pages 876-884, September.

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