One is Almost Enough for Monopoly
AbstractIt has been argued that two factors -- product durability and (potential) entry -- may force a monopolist to price at marginal cost. This article shows that when these two forces coexist, the tendency toward competition may be negated. First, we prove that durable goods oligopolists without commitment powers may attain joint profits arbitrarily close to those of a monopolist with perfect commitment power. Second, we demonstrate that the presence of a potential entrant may enable a durable goods monopolist to act as if he had commitment power. Thus, potential as well as actual entry may restore monopoly power.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 18 (1987)
Issue (Month): 2 (Summer)
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Web page: http://www.rje.org
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- Yuk-fai Fong & Peter Eso, 2008. "Wait and See," 2008 Meeting Papers 303, Society for Economic Dynamics.
- 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.
- Pasquale Schiraldi, 2009. "Second-Hand Markets and Collusion byManufacturers of Semidurable Goods," STICERD - Economics of Industry Papers 48, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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